empty
13.05.2025 12:23 AM
The Dollar Takes Time to Saddle Up but Rides Fast

Investors have shifted from the "Sell America" strategy that emerged after the White House imposed tariffs to "Buy America" amid positive developments in U.S.-China trade relations. While the S&P 500 began climbing as early as April, the dollar held back until the last moment, waiting for the outcome of talks between Washington and Beijing. Only then did EUR/USD bears launch a rapid offensive.

Before his team's visit to Switzerland, Donald Trump suggested that reducing tariffs on China to 80% would be a fair solution. Rumors in the market suggested rates could drop to 60%, but nobody expected a reduction to 30%. Nonetheless, tariffs on U.S. imports fell from 145% to 30%, and on Chinese goods from 125% to 10%. Though the ceasefire is limited to 90 days, Scott Bessent noted that the truce could be extended.

The worst fears that prompted dollar sell-offs—recession concerns—were pushed aside, and EUR/USD quickly moved downward. Investors also recalled how the same Treasury Secretary emphasized the importance of a strong greenback, and how Donald Trump abandoned the idea of firing Jerome Powell as Fed Chair to avoid harming the U.S. currency.

Performance of the Euro vs. the U.S. Dollar Year-to-Date

This image is no longer relevant

This shift in tone from the White House has another motive. EUR/USD has had its strongest start to a year since 2003, driving down the USD Index and heightened inflation risks. On the flip side, excessively high prices increase the likelihood that the Fed will maintain its current federal funds rate, which should support the dollar.

At least, that's the view of Credit Agricole, which has joined the bearish camp on EUR/USD. According to the bank, rumors about the U.S. dollar losing its status as the world's primary reserve currency are greatly exaggerated. Additionally, the loosening of financial conditions supports U.S.-issued assets and gives the Fed room to delay restarting its monetary easing cycle.

Performance of Global vs. U.S. Equities

This image is no longer relevant

Still, the flow of capital out of the U.S. toward other countries in the name of portfolio diversification cannot be easily stopped. Over the past decade, money has overwhelmingly flowed from Europe to North America. But with Donald Trump's return to the White House, the 47th president's imposition of broad tariffs, and Germany's fiscal stimulus, European stock indices are beginning to outperform U.S. ones, benefiting the euro.

This image is no longer relevant

For the first time in three years, the 12-month risk of a reversal in the major currency pair (EUR/USD) has exceeded the 1-month risk, signaling the durability of the upward trend.

EUR/USD forms a "Spike and Ledge" pattern on the daily chart. Holding on to the short positions opened from 1.128 and 1.1225 makes sense. Their fate hinges on the test of support at the pivot level of 1.1165. A breakout would justify adding to the shorts; a rebound would signal to flip the position and go long.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

NZD/USD. Analysis and Forecast

At present, NZD/USD is demonstrating moderate activity and attracting buyers. However, a strong continuation of the upward movement has yet to materialize, as the market remains within its familiar weekly

Irina Yanina 20:39 2025-06-17 UTC+2

GBP/USD. Analysis and Forecast

The GBP/USD pair is steadily holding above the key psychological level of 1.3500 ahead of the UK Consumer Price Index release and the upcoming monetary policy meetings of the Federal

Irina Yanina 20:24 2025-06-17 UTC+2

The Kiwi Doesn't Give Up Despite New Zealand's Weak Economy

We previously noted that New Zealand's economy currently appears weak, and recent data has done nothing to challenge that assessment. The PMI indices deteriorated sharply in May, with the manufacturing

Kuvat Raharjo 12:10 2025-06-17 UTC+2

Market may be falling into same trap again

History is repeating itself. Ahead of America's Independence Day, many market participants were saying that Donald Trump's bark was worse than his bite — suggesting the US president issued many

Marek Petkovich 11:07 2025-06-17 UTC+2

Middle East Crisis as a Prelude to Global War... (Limited Downside Possible for Bitcoin and EUR/USD)

The missile standoff between the U.S. proxy Israel and Iran continues. Yesterday's unexpected departure of the U.S. president from the G7 summit in Canada sparked speculation that America might engage

Pati Gani 09:04 2025-06-17 UTC+2

What to Pay Attention to on June 17? A Breakdown of Fundamental Events for Beginners

Only a few macroeconomic reports are scheduled for Tuesday, and none are significant. In the Eurozone, we'll see entirely secondary economic sentiment indexes from the ZEW Institute

Paolo Greco 06:38 2025-06-17 UTC+2

GBP/USD Overview – June 17: Fed and BoE Meetings as a Reason to Sell the Dollar

On Monday, the GBP/USD currency pair also traded relatively calmly, with a bullish bias. The British pound doesn't reach new three-year highs every day, but looking at almost any higher

Paolo Greco 03:49 2025-06-17 UTC+2

EUR/USD Overview – June 17: Safe-Haven Status No Longer Works

The EUR/USD currency pair traded relatively calmly on Monday, although we expected higher volatility. This is because the last events that traders could react to were from Friday

Paolo Greco 03:49 2025-06-17 UTC+2

Trump Wants to "Pass the Ball" to Europe

Last week, it became known that Donald Trump is seriously considering raising trade tariffs for all countries currently engaged in negotiations with the U.S. Trump is frustrated by the slow

Chin Zhao 00:39 2025-06-17 UTC+2

The Dollar Walks on Thin Ice

When there's money, you buy the best. In past years, the US dollar and dollar-denominated assets—especially shares of the "Magnificent Seven"—were considered the best investments. American stock indices

Marek Petkovich 00:39 2025-06-17 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.