Bank of America quantitative signals indicate that the dollar will continue to strengthen.

Investing.com - Bank of America’s quantitative models indicate that as geopolitical risks and market positions continue to support demand for the US dollar as a safe-haven currency, the dollar will further strengthen.

In a report, Bank of America strategists stated: “Our quantitative signals show the dollar will continue to appreciate because it remains the preferred safe-haven for a broad range of investors.” This view is supported by multiple model indicators, including options flows and technical trend signals, which show sustained demand for the dollar against major currencies.

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Options market positions are increasingly leaning toward bullish bets on the dollar. The strategists noted that options flows and skewness “have broadly shifted toward dollar call options,” while their technical matrix has triggered bearish continuation signals for EUR/USD and AUD/USD.

Bank of America’s Cross-Asset Regime Switch (CARS) model also shows bearish signals across various currencies. In particular, stock and commodity factors are weighing on the yen and the Australian dollar, further reinforcing the dollar’s overall strength in the current market environment.

Despite these signals, strategists pointed out that not all investors are convinced of the dollar’s rally. They noted: “Since the start of the US-Iran conflict, all weakness in EUR/USD has occurred during non-US trading hours.”

During US trading hours, the euro has actually appreciated against the dollar, indicating that US investors have been selling dollars, while Asian and European investors have been buying dollars.

Beyond the dollar outlook, the bank’s model also highlights the Canadian dollar as a key opportunity. Bank of America states that a bullish outlook on the CAD remains its strongest signal, with EUR/CAD and AUD/CAD appearing vulnerable as trend and event signals point to further declines in these crosses.

The strategists said: “We also believe that a bearish outlook on AUD/CAD could be attractive. Considering how crowded long positions in the Australian dollar were before the crisis, and how little the AUD has fallen so far, shorting the AUD might be the best short-term value.”

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