BofA signals USD trend reversal against major G10 currencies

Bank of America (BofA) has identified a broadening trend reversal signaling a stronger U.S. dollar against major G10 currencies, including the euro, yen, pound, Canadian dollar, and New Zealand dollar. This shift follows resilient U.S. payrolls data, with BofA noting that front-end option flows no longer anticipate USD downside and volatilities have turned bullish from oversold spot levels. BofA is tactically bullish on USD/CAD, anticipating Canadian job losses, and on USD/JPY, though it cautions that details of upcoming tariff letters could potentially shift the market narrative against the dollar.

Analysis

Bank of America has signaled a broad-based trend reversal favoring U.S. dollar strength against major G10 currencies, a view supported by resilient U.S. payrolls data. The bank's research, dated June 30, 2025, now indicates explicit trend reversal signals for the USD against the euro, Japanese yen, British pound, Canadian dollar, and New Zealand dollar. This shift is corroborated by derivatives market activity, where front-end option flows no longer anticipate short-term dollar weakness and up/down volatilities have turned bullish from what BofA identifies as oversold spot levels. Tactically, the firm has adopted a bullish stance on USD/CAD, anticipating net job losses for Canada following four consecutive months of weak labor data. It also turned bullish on USD/JPY as its proprietary CARS model exited a 'macro shock regime' and option flows moved toward JPY puts. However, a significant near-term risk remains, as the bank cautions that details of U.S. tariff letters expected this week could potentially shift the market narrative against the dollar.

Key Decisions for Investors

• Investors should consider positioning for renewed U.S. dollar strength against G10 currencies, as indicated by Bank of America's analysis of fundamental data and options market flows.
• The tactical bullish calls on USD/CAD and USD/JPY warrant attention, with the former being particularly sensitive to the upcoming Canadian employment data release.
• It is critical to monitor the details of forthcoming U.S. tariff letters, as this represents the primary near-term risk factor that could invalidate the bullish dollar thesis.