NEW YORK (MarketWatch)—Currency strategists at British bank HSBC on Friday reiterated their contrarian call for the U.S. dollar’s torrid rally to soon come to an end. This time drawing a comparison between the currency’s sharp rise since last May to the pattern presented by classic asset-price bubbles.

Strategists led by David Bloom argued in March that the rally was nearing the end of its run, making HSBC the first bank to raise its euro EURUSD, -0.06% forecast for 2016 and 2017.

In a Friday note, they elaborated on their call, drawing a parallel between the ICE dollar index’s DXY, +0.03% gain of more than 25% since May 2014 and classic bubbles, such as the tulip mania that gripped the Holland in the 17th century or the South Sea Bubble of 1720.

“This constitutes a significant move and major rallies tend to have similar life cycles,” HSBC wrote. “In fact, such life cycles tend to follow the typical phases of classic asset-price bubbles, just on a smaller scale.”

In the chart included in this report, they lay out the anatomy of typical asset-price bubbles, which HSBC’s researchers divide into four phases. The dollar, they argue, is in phase 3.

Phase 1: ‘New discovery’

In the first phase of a bubble, the cycle starts with a “new discovery.” For the dollar, the first phase was the start of the “currency war,” in which countries sought to depress the value of their own currencies in the wake of the financial crisis in an effort to gain a competitive edge. The U.S. recovery, with its better fundamentals relative to other major economies, set up the greenback to appreciate, HSBC argues.

Phase 2: ‘Early rise’

The second phase is the “early rise,” where savvy investors realize an important change is afoot, get in early and make healthy gains, contributing to a further rise.

In this case, the European Central Bank’s rhetoric in the lead-up to the launch of quantitative easing and the Fed’s tapering of its own quantitative easing plan contributed to a “justifiable adjustment” in exchange rates, they write.

Phase 3: ‘The pace picks up’

In phase three, the pace of the rally picks up and eventually becomes “divorced from reality,” they write, with a consensus forming around the idea that “this time it’s different, potentially leading to a final surge higher.

Right now, “participants are buying the [dollar], not because the fundamentals have changed…but instead simply because they think the rally will continue.” The ECB’s quantitative-easing program is already known in terms of scale and duration, while a Fed rate hike is already widely anticipated, HSBC’s strategists say.

Phase 4: ‘The subsequent fall’

“ “The party is nearly over, it’s time to gather your belongings and get out while you can,” ” — HSBC strategist

Phase four is the “subsequent fall.” After a huge rally, a small change to sentiment can lead to a sudden reversal of direction, they warned. Often, there is no pause before the fall. This can get messy, with prices stabilizing only after capitulation is complete, HSBC points out.

For the dollar, “a final, temporary lurch higher” that pushes the euro toward parity is a possibility, they said, but would be a signal that the U.S. currency is overstretched rather than the start of a new upside surge.

“The party is nearly over, it’s time to gather your belongings and get out while you can,” HSBC warns.