A rally in the Dollar Index represents a selling opportunity as the gauge is poised to break out of a “drawn out consolidation,” according to Bank of America Corp., citing technical patterns.
The index will increase to no higher than 80.87 before resuming a downward trend to 78.41, based on Elliot Wave analysis, MacNeil Curry, head of foreign exchange and interest rates technical strategy at Bank of America Merrill Lynch in New York, wrote to clients. It may fall to as low as 76.43, he wrote.
“I do think you should be selling the Dollar Index on a bounce,” Curry said in an e-mail. “The reason it has taken longer to fall than I previously thought is because the consolidation has unfolded as a triangle, which is a pattern that takes longer to unfold than many other types of corrections/consolidations.”
The bounce shouldn’t exceed the Jan. 4 high of 80.87, Curry wrote to clients.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, was little changed at 79.445 at 3:40 p.m. in New York. The gauge is weighted 57.6 percent to movements in the euro.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, index or currency. Elliott Wave theory, created by Ralph Elliott in the 1930s, seeks to predict moves by dividing past trends into five sections, or waves, and calculating changes in value.