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Investing.com -- Bank of America analysts said “the real test for USD bears begins this week” as quantitative signals weaken for both the euro and the yen.
In their latest FX Quant Insight report, BofA wrote that “FX quant signals deteriorate for both the EUR and JPY,” suggesting that the recent U.S. dollar downtrend “appeared to be stalled last week.”
For the euro, BofA said “option flow signal is the most bearish since Dec 2024,” adding that “EURUSD uptrend is also on the verge of turning neutral.”
The bank said “option flow shows below -1.0 call percent z-score with falling 1m risk reversal for the first time since December 2024,” and warned that “a close below the 50d SMA of 1.1680 should neutralize the trend.”
BofA said “the DXY index has perked to the 98-handle with both the EUR and JPY weakening against the USD.”
The note added that “the USD downtrends in U.S. hours appeared to have bottomed out in the last week of September,” with the dollar “grinding higher in U.S. trading hours against both the EUR and JPY since then.”
On the yen, the analysts said “trend continuation and option flow are broadly bullish for cross-JPY pairs” and that “the knee-jerk JPY selloff to start the week does not appear to be stretched yet.”
BofA concluded, “In the absence of weaker U.S. labor data and lingering risks from the collapse of the French government, we would prefer to hold a bearish EURUSD view for the week.”