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Investing.com -- A deeper slide in EUR/USD could spark substantial unwinds from commodity trading advisors (CTAs), according to Bank of America (BofA) latest Systematic Flows Monitor.
The report shows that CTAs remain fully long EUR/USD, with trend strength rated at 100% across short-, medium-, and long-term models.
However, BofA flags a key downside trigger at 1.1519, implying that a break below this level could prompt systematic selling.
The dollar’s recent strength has already begun to pressure crowded positions. BofA notes that some of its “most risk-averse trend following models” have exited stretched long positions in GBP, and sees potential for broader capitulation across FX if the dollar rally persists.
The next CTA unwind trigger for GBP/USD stands at 1.3243.
In contrast, while the long position in the Mexican peso (MXN) remains stretched, BofA indicates that unwinds are “further away.”
The models also show short USD positions versus AUD and CAD, with mixed positioning against the yen (JPY). Looking ahead, BofA expects trend followers to “buy USD vs JPY and CAD.”
In equities, CTAs added to long positions in the U.S. as the S&P 500 and Nasdaq 100 hit fresh all-time highs.
BofA sees consensus long positioning across all trend horizons in Nasdaq-100 futures, noting that this increases the risk of sharp reversals.
“Our closest NASDAQ unwind trigger is still more 2% lower from Friday’s close with selling accelerating at 5% lower from the index high,” the report said.
Elsewhere, CTAs continued to buy CME copper following tariff-related price gains, while a divergence with LME copper could lead to selling next week.
In fixed income, trend signals weakened, and BofA reports that CTAs remain short 30-year U.S. Treasury futures and Bunds, but long Chinese government bonds, where some selling is expected next week.