Investing.com – The dollar is enjoying a three-week winning streak and is on track for its biggest October gains in over a decade, but BofA analysts believe the bullish streak will stall and the rally will begin to fade.

“We believe the U.S. dollar rally is losing momentum and has begun to fade,” BofA analysts said in a note on Monday

The dollar rate, which measures the greenback against a trade-weighted basket of six major currencies, rose about 2.5% in October, marking its best monthly performance since September 2022.

The dollar is gaining in value thanks to several bullish factors: higher yields in the US; a unthreatening haven in the face of geopolitical tensions; and a relatively resilient U.S. economy.

However, these drivers are expected to run out of roads sooner or later, limiting the flight of the dollar.

“The US dollar benefited from higher US yields, safe haven flows and relative better US economic performance. However, we believe that these factors are losing momentum,” the analysts added.

However, in the current macro context, not all USD-linked pairs are destined to stagnate, suggests BofA, emphasizing that “choosing the right USD pair to weaken is important as some bullish signals for the USD remain.”

“We prefer to remain bearish this week given our inconsistent call for a 25 basis point BoC rate cut,” the analysts added, estimating USDCAD’s near-term fair value to be 1.36 with the USDCAD bullish rate likely ” will be squeezed in a 25 basis point rate cut scenario.”

The euro will probably be one of the biggest beneficiaries of the weakening dollar, as well as the improving economic situation in the euro zone and the relatively hawkish stance of the ECB. Analysts predict that by the end of 2025 the common currency will strengthen against the dollar to $1.15.