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Investing.com - The U.S. dollar experienced a major technical breakdown in its broad trade-weighted index after becoming oversold during the first half of this year, according to a new analysis from BCA Research.
BCA Research indicates that while the greenback will likely find support in the short term, any strength "will not last for long." The research firm points to the dollar’s technical breakdown as evidence of a potentially sustained weakness ahead.
The relative performance of the US equal-weighted equity index versus its global counterpart is struggling to resume its uptrend, according to the analysis. BCA notes this ratio "has been a good compass for the greenback, and it spells trouble ahead for the US dollar."
A breakout in the Japanese yen would align with the broad trade-weighted US dollar falling, BCA suggests, adding this scenario would "probably" coincide with global risk assets selling off.
For the broad trade-weighted dollar to resume what BCA characterizes as its "bear market," cyclical currencies including the Canadian dollar, Australian dollar, and New Zealand dollar would need to break above their three-year moving averages, a condition that "has not yet happened," according to the research.
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