Despite Europe’s attempts to flatter the US in the face of tariffs and a slowing business sector, the upward trend on the EURUSD pair will likely persist as long as the US vision is fully realized. Let’s discuss this topic and develop a trading plan.
The article covers the following subjects:
Major Takeaways
- Rumors of lower tariffs against China supported the US dollar.
- The US trade wars are helping China.
- Europe is flattering the greenback to urge the US to remove tariffs.
- The euro can be bought on a rebound from 1.1285, 1.124, and 1.118.
Weekly US Dollar Fundamental Forecast
Have the markets gained influence over Donald Trump? The US President’s displeasure with the S&P 500’s reaction to the imposition of tariffs on America’s “Liberation Day” was evident. The subsequent 90-day delay was the right call. The broad stock index experienced a significant decline in response to criticism of Jerome Powell, and Donald Trump was compelled to state that he had no intention of firing him. The US President is monitoring the stock market, and someone is attempting to exploit this information.
The primary factor contributing to the EURUSD pullback was not the slowdown in European PMIs, the Bundesbank’s assertion that the German economy may not recover from the recession due to tariffs, or the favorable remarks made by European officials regarding the US dollar. Instead, it was the growth of S&P 500 quotes on insider trading.
Euro-Area PMIs
Source: Bloomberg.
Citing White House officials, the Wall Street Journal reported that the US President was planning to reduce tariffs against China unilaterally. The range of duties on imports is expected to decrease from 145% to 50–66%. A segmented strategy is also being considered, with national security-related shipments subject to a 100% tariff and the rest levied at 35%.
However, Treasury Secretary Scott Bessent and White House Press Secretary Karoline Leavitt denied the information about unilateral tariff cuts. However, buyers of the S&P 500 and the US dollar continued to push the quotes higher. They recalled the precedent set by the deferral of duties on imports, information that had been published in the press prior to the official announcement.
The EURUSD pair’s decline was driven by the finance ministers of Germany and France, who stated that the euro was not a competitor to the dollar and that the greenback remained the primary reserve currency. Bundesbank President Joachim Nagel also noted that a strong US Treasuries market was essential for global financial markets.
Foreign Exchange Reserves of Central Banks
Source: Bloomberg.
In anticipation of the upcoming discussions between Washington and Brussels, Europe’s overt compliments were anticipated. However, despite the pullback in the EURUSD exchange rate, confidence in the US dollar has been affected. Until the US adjusts its approach to equalizing trade balances, the major currency pair is expected to continue demonstrating sustained growth.
It is clear that no one is going to step back. Conversely, Scott Bessent’s concept is one that is sure to send chills down your spine. It appears that by initiating a trade war, the US is inadvertently benefiting China. It is generally understood that the structure of the Chinese economy is clearly skewed towards exports, and the US will address this issue through the implementation of tariffs.
Weekly EURUSD Trading Plan
Such a rhetoric is a strategy to stabilize the markets. However, by addressing the trade balance, Washington is inadvertently creating challenges for itself, which in turn hampers capital inflows. This is a structural process that signals long-term weakness in the greenback. Therefore, long trades on the EURUSD pair can be considered on a rebound from support levels of 1.1285, 1.124, and 1.118.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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