While the decline in the USD Index has been far deeper than expected, Bank of America Merrill Lynch (NYSE:BAC) maintains its bullish bias, noticing that the month of May is the second-strongest month of the year for the USD.
"Looking specifically at the USD Index, the confluence of support between 94.80 and 94.32 should prove significant support and the likely basing point for a resumption of the larger bull trend (we target 100 ahead of 106). An impulsive break of 96.17 would confirm the base and turn higher," BofA projects.
Meanwhile, BofA BofA remains bullish and long USD/JPY.
"Evidence says that the bull trend of the past 4+ months is drawing to a conclusion and the long-term uptrend is set to resume for 124.59, ahead of 128.45. Below 118.33 invalidates this view and points to continued range-trading, while those awaiting additional price confirmation need a break of 120.86 (the Apr-13 high)," BofA adds.
In line with this view, BofA maintains a long USD/JPY position from 119.71 with a stop at 118.32 and a target at 124.59.