Investing.com – The euro is benefiting from bullish momentum at the moment, according to Bank of America Securities, and this looks likely to continue.

In August, the U.S. dollar selloff was undoubtedly the focal point for the foreign exchange market, BoA analysts said, in a note dated Aug. 26, while the broad euro rally may have been underappreciated by investors. 

However, month to date, the euro’s nominal effective exchange rate (NEER) has appreciated by 1.1% on a trade-weighted basis, ranking at the 80th percentile versus the past 20 years, the bank added. 

The euro’s strength is not just about spot bilaterally breaking out, the bank said, as across non-USD G10 currencies, EUR may have the most near-term bullish momentum.

“Over the past month, 1m skew (risk reversal over atm vol) rose by 12% for EUR/USD calls, by far the highest across all USD/G10 pairs,” BoA said.

With this in mind, and given the momentum for the euro, the bank recommends a bullish view on the cross this week.

“EUR/SEK stands out as an appealing candidate to us as the pair has returned -3% over the past month, ranking at 3rd percentile over the past decade,” the bank said. “The EUR/SEK spot move has been in contrary to the bullish EUR options flow and is dislocated vs 2y EU-SK rate differential.” 

The SEK rally is stretched, BoA added, and, in our view, was largely driven by existing short SEK positioning unwind and speculators treating SEK as a “high- beta” proxy for the EUR amid this month’s risk recovery. 

“With EUR/SEK spot having fallen now to trendline support and 200d SMA, the level has become sufficiently attractive to tactically fade the month-to-date EUR/SEK move.”

At 06:15 ET (10:15 GMT), EUR/SEK traded 0.1% lower at 11.3905.