Anna 
Bank of America (BofA) has issued a report projecting significant selling of the US dollar (USD) by Commodity Trading Advisors (CTAs), commonly known as trend followers, throughout the upcoming week. According to the report, these traders are anticipated to shift their positions towards other currencies, including the European Euro (EUR), British Pound (GBP), Australian Dollar (AUD), Japanese Yen (JPY), Mexican Peso (MXN), and Canadian Dollar (CAD), in response to developments in the currency markets.
The analysis from BofA’s model suggests a direct correlation between the extent of USD selling by CTAs and the currency’s depreciation. As the value of the USD experiences sharper declines, the volume of USD sales by trend followers is expected to escalate accordingly.
This forecast aligns with recent observations of the JPY’s weakening, returning to levels that historically prompted intervention by the Bank of Japan. The report highlights this trend as a contributing factor to CTAs’ anticipated USD selling activity.
Additionally, the report underscores the potential impact of reduced liquidity in the foreign exchange (FX) markets at the onset of the week due to bank holidays in both the United States and the United Kingdom. BofA warns that this environment of decreased liquidity could heighten the susceptibility of FX markets to substantial movements, particularly in response to significant trading flows.
As market dynamics evolve in the coming days, traders and investors are advised to closely monitor developments in the currency markets, considering the potential implications of CTAs’ anticipated USD selling activity amidst prevailing market conditions.
