Markets are entering a pivotal stretch. With macro volatility rising, BCA Research believes there are still opportunities to generate alpha—if investors position correctly.
In yesterday’s strategy note, Chester Ntonifor, BCA’s Foreign Exchange and Global Fixed Income Strategist, outlines three trade ideas he expects to outperform this summer.
These ideas span the dollar, commodities, and currency pairs—tactical in nature but grounded in longer-term shifts in the global macro regime.
1. A contrarian case for buying the dollar
It may sound counterintuitive, but BCA is getting ready to buy the dollar.
The US Dollar Index is down roughly 10% year-to-date, breaking what’s been a multi-decade uptrend. According to BCA, this drawdown is nearing key technical levels that have historically triggered strong countertrend bounces.
The dollar may be in a broader bear market regime, especially with concerns about U.S. balance of payments and rising scrutiny of its reserve status. But in the near term, it’s oversold.
“We will be buying the DXY on Independence Day,” Ntonifor wrote, citing a convergence of technical signals. The strategist noted that the DXY is approaching long-term support near 96, defined by an uptrend that began in 2008. This zone has historically marked the start of strong rallies, even during longer-term downtrends.
BCA’s momentum and positioning indicators show the dollar is “very much oversold,” with some components hitting levels two standard deviations below their mean—a rare occurrence that has preceded sharp reversals.
BCA also points out that 5-10% rallies are not unusual within the context of a dollar bear market. Whether driven by short-covering or recession concerns, these tactical bounces can offer meaningful returns.
For investors, the key takeaway is not to ignore the dollar. Even in a bearish environment, the greenback still provides opportunities—especially when sentiment gets stretched.
2. Bet on petrocurrencies over energy importers
The next idea is to play the relative strength between oil producers and oil consumers. BCA is advising investors to go long a basket of petrocurrencies—such as the Canadian dollar, Norwegian krone, and currencies from other oil-exporting countries—against those of net importers.
The rationale is threefold. First, petrocurrencies are typically backed by current account surpluses, which become increasingly attractive in a market focused on balance of payments.
Second, oil prices could rise from here, and while that would normally support the dollar, the correlation between oil and USD has shifted.
In fact, BCA argues that the dollar has become a kind of “petrocurrency” itself, thanks to the U.S. becoming the world’s largest oil producer.
That complicates simple long-oil/short-dollar trades. But it also strengthens the case for using cross-currency pairs—long oil exporters versus importers—as a cleaner way to express views. There’s also a geopolitical angle.
“There is very little geopolitical risk premium in the current oil price,” BCA notes, citing $68 as the marginal cost of U.S. production. Should tensions rise in the Middle East or elsewhere, Crude Oil WTI Futures could spike—and currencies of producers may outperform sharply.
In short, petrocurrencies offer a way to sidestep direct dollar exposure while gaining from rising oil prices and geopolitical risk. It’s a differentiated trade with asymmetric upside.
3. Precious metals are still in play
Finally, BCA remains constructive on precious metals, particularly as a hedge against the long-term erosion of dollar dominance. While nearly 90% of global transactions are still conducted in dollars—and that share has even risen over the past decade—there are signs of diversification.
Countries like Russia, China, and others have steadily increased their XAU/USD holdings. In 2010, gold made up just 10% of global central bank reserves. Today, it’s the largest non-dollar holding. This trend shows no signs of slowing, especially among emerging markets wary of overexposure to the dollar-based financial system.
Gold has been a major beneficiary. But BCA sees room for rotation within the precious metals space. As the de-dollarization theme gains traction, cheaper metals like silver and platinum have started to catch up. The next candidate, according to BCA, is palladium.
While gold remains a core allocation for many global central banks, Palladium Futures could offer outsized returns as investors seek alternatives with more upside and tighter supply dynamics.
This trade also benefits from long-cycle dynamics. Just like the dollar, precious metals tend to move in prolonged multi-year trends. And if the dollar’s regime is indeed shifting, that could set the stage for sustained outperformance in metals—not just in 2025, but well beyond.
