The dollar will gain against the euro, pound and yen, Max Knudsen, Chief Market Strategist at ADS Securities, Abu Dhabi, told CNBC, as investors take the opportunity to sell the euro on any improvement and as sterling ends its recent climb.
“Some of the moves that we’re seeing are introducing some pretty structural changes in sentiment in the dollar markets,” Knudsen told "European Closing Bell", adding that each of the rallies in the dollar has been getting smaller.
It’s not only longer-term investors that are looking to sell bounces in the euro, according to Knudsen. In May, you’re seeing day-traders selling the single bloc currency on any improvements, he added.
Euro/dollar will head to 1.2621 this week, Knudsen said, pointing out this was January’s low.
“The floor that has been there for the euro – this buying the dips – that’s finished, that’s ending,” Knudsen said. “I think we’ll go through January’s low and we’re then into a mood where anyone that’s bought the euro this year is under water.”
For sterling/dollar , Knudsen pointed to a period of sterling buying between April 16 and April 27.
“That’s ten days in a row,” he said. “That is the most sustained period of buying for 18 years.”
This ten-day trend led Knudsen to conclude that sterling’s strength couldn’t continue. He pointed out that apart from the recent dip, every other decline in sterling has been bought by investors.
“The break of this trend shows you that people are not buying Cable (sterling) anymore. And I think we’ll be heading down towards April’s low,” he said.
A similar trend can be seen in dollar/yen , according to Knudsen.
“The reason why we’re more bullish this week on dollar/yen is that since March’s high, there has been a clear trend of investors selling the bounces in dollar/yen,” he said. “But going into the end of last week, what we noticed is that momentum was actually slowing.”
Knudsen has an upward target of 81.39 for dollar/yen and said that the currency cross could move higher to 82 over the next couple of weeks.