Bank of America technical analyst Paul Ciana expressed a tactically bullish stance on the dollar, saying that the greenback is set for the second episode of a snapback rally in May.
The US dollar index (DXY), which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, has been able to defend support at the 100.79 level over the previous sessions.
According to the technical analyst, this might represent a fresh bear trap for those who are betting on the dollar's collapse.
"On April 25 a bullish reversal day formed" while "a bullish trend line break has also been made," Ciana said in a note released on Wednesday.
The analyst now sees the 50-day moving average, currently at 103.18, as the next target for the dollar index.
Chart: DXY Technical Analysis According To Paul Ciana
Positive Seasonality Supports The Greenback in May
According to the analyst, the U.S. dollar exhibits a strong seasonality from April 30 to May 16, looking at the last thirty years of data. "By the end of April the DXY tends to find its low for the month as it bases and rallies through mid-May," Ciana said.
The expert observed that the DXY generally tends to surge in May, with a stronger momentum rally in the first two or three weeks of the month.
A Broad USD Rally
The Bloomberg US dollar Index, which is a broader gauge of the U.S. dollar than the popular DXY index, is tracked by the WisdomTree Bloomberg U.S. Dollar Bullish Fund USDU, and is likewise displaying similar bullish signs as the DXY. In other words, Ciana expected a broad USD rally.
Read now: The Dollars Death, Not So Fast
Photo: Shutterstock
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