empty
28.04.2025 04:23 PM
USD fails to be resilient

Is the US dollar overvalued? Bank of America thinks so. The bank points out that in previous cycles, when the USD Index peaked in the mid-1980s and early 2000s, the result was a major downward trend, with the greenback falling by 25–30%. Currently, foreign investors hold $22 trillion in US assets, and a sell-off would be a nightmare for EUR/USD bears. However, not everyone shares this outlook.

Credit Agricole believes the US dollar sell-off is overdone. According to the bank, investors are overlooking negative factors for EUR/USD, such as the harmful effects of trade wars on the eurozone economy, the gradual stabilization of the political situation in the US, and the excessive bearish positions against the US dollar. Indeed, speculative players—asset managers and hedge funds—have spent recent weeks almost exclusively selling the greenback.

USD speculative dynamics

This image is no longer relevant

Banks and investment firms hold differing views on the fate of EUR/USD, which has contributed to the pair consolidating within a narrow trading range. Notably, Trump's first 100 days in office resulted in the worst performance for the US dollar on record even breaking Richard Nixon's negative record from the 1970s.

One factor behind the dollar's downward trend has been capital outflows from North America to Europe. Initially, investors were spooked by the White House's large-scale tariffs on "American Liberation Day" and sold the EuroStoxx 600. However, now, they are returning to the index, confident that Washington-Brussels trade talks will end positively. Continued ECB monetary easing, combined with German fiscal stimulus, is expected to further fuel the rally in European equities.

According to the ECB, Donald Trump's tariffs are projected to accelerate eurozone inflation by 0.7 percentage points in 2025, by 0.4 in 2026, and by 0.3 in 2027. Without these tariffs, the region would once again face deflation for this year and the next two. As it stands, consumer prices are forecast to grow by 2.3%, 1.9%, and 2%.

Eurozone Inflation without and with tariffs

This image is no longer relevant

This image is no longer relevant

Such CPI dynamics enable the European Central Bank to continue easing monetary policy. Under normal conditions, expectations of a deposit rate cut would weigh on the euro. However, when Forex pricing is driven by capital flows, monetary expansion supports both European stock indices and EUR/USD.

Technically, the daily chart for the main currency pair shows continued short-term consolidation within the 1.1315–1.14 trading range, forming the Surge and Shelf pattern. Placing pending buy orders on EUR/USD above 1.14 and sell orders below 1.1315 remains a relevant strategy. The main thing is not to open too many short orders.

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
  • Chancy Deposit
    Deposit your account with $3,000 and get $1000 more!
    In June we raffle $1000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST

Recommended Stories

USD/CAD. Analysis and Forecast

The USD/CAD pair is showing a modest recovery from levels below 1.3600, retracing most of the previous day's losses, supported by a rebound in the U.S. dollar. In addition, concerns

Irina Yanina 13:09 2025-06-13 UTC+2

AUD/JPY. Analysis and Forecast

The AUD/JPY pair has been under selling pressure for the third consecutive day, reaching an almost two-week low around 92.30 during Friday's Asian session. After a sharp drop, spot prices

Irina Yanina 12:53 2025-06-13 UTC+2

Israeli Missile Strike on Iran Will Crash Global Markets (I Expect Bitcoin and #NDX to Resume Their Decline After a Local Upward Correction)

As I anticipated, the lack of a broad positive outcome in negotiations between China and the U.S. and renewed inflationary pressure led to a sharp decline in demand for corporate

Pati Gani 10:10 2025-06-13 UTC+2

Greed Will Do the Market No Good

The less you know, the better you sleep. Encouraged by a 21% rally in the S&P 500 from its April lows, the crowd continues to buy the dip—completely unbothered

Marek Petkovich 09:35 2025-06-13 UTC+2

What to Pay Attention to on June 13? A Breakdown of Fundamental Events for Beginners

Several macroeconomic reports are scheduled for Friday, but we doubt that the data will significantly impact traders today—especially today. As a reminder, Donald Trump intends to raise tariffs

Paolo Greco 07:16 2025-06-13 UTC+2

GBP/USD Overview – June 13: The Court Won't Stop Donald Trump!

The GBP/USD currency pair continued its upward movement on Thursday and nearly updated its three-year high. For most of the day, quotes hovered around the 1.36 level

Paolo Greco 03:41 2025-06-13 UTC+2

EUR/USD Overview – June 13: America's Economy Gets Lucky

The EUR/USD currency pair continued its strong upward movement throughout Thursday. Is anyone still puzzled as to why the U.S. dollar keeps falling? From our point of view, the reasons

Paolo Greco 03:41 2025-06-13 UTC+2

Trump Sends Out "Letters of Happiness"

It has been less than two weeks since Donald Trump raised import tariffs on steel and aluminum for all countries except the UK. While negotiations with the UK were deemed

Chin Zhao 00:21 2025-06-13 UTC+2

GBP/USD. A Weak Pound Stronger Than a Weak Greenback

Following weak UK labor market data, equally soft figures on British economic growth were released on Thursday. Almost all components of the report came out in the "red zone," increasing

Irina Manzenko 00:20 2025-06-13 UTC+2

The Dollar Flees the Battlefield

The old becomes new again. The word "recession" again trended in the Forex and other financial markets. May's U.S. Consumer Price Index (CPI) fell short of Bloomberg analysts' forecasts. Following

Marek Petkovich 00:20 2025-06-13 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.