European investors are short USD now: BofA

BofA FX analysts on DXY: "Demand for USD in Europe and Asia hours fueled the USD rally earlier in 2024. However, following the global market shock this month, Europe-based investors are now cumulatively net short USD for the year, coinciding with recent EURUSD breakout to 1.10. The USD has become less appealing to foreign investors as US data converged toward rest of the world amid falling US yields. Looking ahead, we discuss 3 implications for FX market: 1) EURUSD uptrend continuation to our year-end forecast of 1.12 with both US and Europe-based investors chasing the move; 2) more room for laggards like AUD to rise as Europe-based investors further pare long USD returns; 3) more EURUSD volatility in US hours into the US election. The risk to our overall view is demand for the USD from Europe-based investors resumes as global geopolitical tension rises."

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