Is Now the Time to Buy the US Dollar?

Tactical indicators suggest a short-term rebound, but long-term risks persist for the greenback

Dollar Outlook: Short-Term Strength, Long-Term Risk

As global markets shift, investors are asking: should you buy or sell the US dollar over the next three to six months? According to leading analysts at BCA Research, the answer may depend on your investment horizon.

While long-term indicators point to structural weaknesses, short-term technical signals suggest the dollar may be set for a temporary rally.

Dollar Facing Pressure from Structural Imbalances

BCA Research warns that a balance-of-payments crisis could cause a significant regime shift for the dollar. This risk, already well known among institutional investors, could drive a broad retreat from US assets in the long run.

“Mechanically, the dollar needs to depreciate,” says strategist Chester Ntonifor.

US exceptionalism—the idea that America is insulated from global economic pressures—may be fading, increasing the likelihood of long-term dollar weakness.

Short-Term Signals Say: Go Long

Despite long-term caution, BCA’s technical indicators now support going long on the dollar over the next three to six months. The greenback is considered oversold, meaning it could rebound as markets correct.

“Tactical indicators do matter,” Ntonifor explains.
“Right now, they are telling us the USD is due for a bounce.”

This short-term opportunity is based on momentum and positioning data, not on fundamental shifts in policy or economic performance.

Overbought Rivals May Fall Back

Some major currencies are now considered overbought, particularly:

• British pound (GBP)
• Norwegian krone (NOK)
• Euro (EUR)

BCA advises short positions on these currencies, suggesting they could face a correction. In particular, sterling is seen as overextended after a strong recent run.

Meanwhile, currencies such as the Japanese yen (JPY), Australian dollar (AUD), and New Zealand dollar (NZD) are seen as neutral, offering fewer immediate opportunities.

Strategic Advice: Sell Strength Over Time

For long-term investors, BCA maintains a bearish view on the dollar. Their recommendation? Use any short-term rallies to reduce exposure to the greenback.

“Sell on strength,” the firm advises strategic investors with a longer time frame.

This aligns with growing concerns about US fiscal imbalances, persistent inflation pressures, and trade deficits, all of which could weigh on the currency in the years ahead.

Is the Dollar a Good Medium-Term Buy?

Yes—for the next 3–6 months, technical indicators suggest the dollar is positioned for a rebound. If you're an investor with a short-to-medium-term horizon, this could be a good window to take advantage of dollar strength, particularly against overbought currencies like the pound and euro.

However, if your strategy is focused on long-term fundamentals, the dollar still faces headwinds. Use any bounce as a chance to rebalance and diversify away from US-dollar-heavy assets.

Key Takeaways

• Buy USD short term: Tactical data favours dollar gains in the next 3–6 months
• Sell USD long term: Structural risks like trade deficits could erode value over time
• Short GBP, NOK, EUR: These are overbought and vulnerable to a correction
• Watch neutral currencies: JPY, AUD, NZD may offer future opportunities

Sources: (Investing.com, Reuters.com)