empty
27.05.2025 12:23 AM
The Dollar Is in Panic

Everything has become tangled in the international currency market. A few months ago, doubts among Federal Reserve officials about the need to resume monetary easing in September—coupled with confidence from their European Central Bank counterparts in imminent rate cuts—would have sunk EUR/USD. Yet, as spring comes to a close, the euro is confidently heading north. Donald Trump's restructuring of the international trade system affects everyone in the Forex market.

According to Minneapolis Fed President Neel Kashkari, anything is possible. The FOMC official is uncertain whether the federal funds rate will be cut in September. It all depends, he says, on whether the U.S. has concluded trade negotiations with other countries by then. That clarity will determine whether the Fed should ease policy. In contrast, Bank of Lithuania Governor Gediminas Simkus sees ample opportunity for a deposit rate cut at the ECB's next meeting.

Monetary policy divergence, the resulting rise in Treasury yields, and the widening yield spread with European bonds served the EUR/USD bears well in 2022–2024. Today, however, speculators are actively selling off everything related to America, including the dollar.

Dynamics of Hedge Fund and Asset Manager Positions in the U.S. Dollar

This image is no longer relevant

I believe this situation is primarily driven by fear. The idea is that inflationary pressures will prevent the Fed from lowering borrowing costs. In the end, the economy won't be able to withstand such high rates and will plunge into recession. Moreover, the White House's aggressive fiscal stimulus will require a new wave of large-scale Treasury bond issuance — and there may not be enough buyers. Yields will climb across the curve, potentially knocking the U.S. economy off its feet.

The eurozone, meanwhile, is seeing the opposite situation. Yes, trade wars — due to the EU's substantial trade surplus with the U.S. — will hurt German exporters and others across the continent. But the ECB will do everything possible to ease that pain. Monetary expansion will be deployed, and the markets welcome this. A combination of ECB policy easing and German fiscal stimulus could help support the struggling eurozone.

Dynamics of the U.S. Trade with the European Union

This image is no longer relevant

This image is no longer relevant

Old beliefs are being challenged in the Forex market, and traders must be adaptable and quick learners to navigate the turbulent waters of international currency trading. I believe the declining trust in the U.S. dollar is significant and likely to endure for quite some time. Officials from the ECB seem to agree, as they think this loss of confidence in the dollar will enhance the euro's appeal.

Technically, on the daily EUR/USD chart, there is an intense battle for the upper boundary of the fair value range between 1.12 and 1.1395. A defeat for the bulls would allow a pin bar to form. A victory would provide a basis to add to long positions opened at 1.1225 and 1.1285.

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

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.