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
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

USD/JPY. Analysis and Forecast

The USD/JPY pair remains under pressure despite the U.S. dollar posting moderate gains for a second consecutive day, approaching the 144.00 level. Improved global risk sentiment following the trade agreement

Irina Yanina 15:01 2025-07-03 UTC+2

XAU/USD. Analysis and Forecast

Gold prices are struggling to gain momentum after a moderate intraday rebound from the $3340 level. Traders remain cautious, preferring to await the release of the U.S. Nonfarm Payrolls (NFP)

Irina Yanina 12:21 2025-07-03 UTC+2

EUR/JPY. Analysis and Forecast

consecutive day, once again approaching the yearly high reached earlier this week.The trade agreement between the United States and Vietnam has eased concerns over a prolonged trade conflict, increasing investor

Irina Yanina 12:13 2025-07-03 UTC+2

Good News Will Support Stock Markets and Token Demand (Potential Upside for Bitcoin and #NDX)

The market has ignored extremely weak employment data from ADP, focusing its attention on other factors. The ADP report released on Wednesday showed a significant slowdown in the U.S. private

Pati Gani 10:40 2025-07-03 UTC+2

Trump Targets China Through Vietnam

Yesterday, it was revealed that President Donald Trump had reached a trade agreement with Vietnam. This came after several weeks of intense diplomatic negotiations between the two countries and just

Jakub Novak 10:00 2025-07-03 UTC+2

A Wake-Up Call for the U.S. Economy

Yesterday's U.S. employment data served as a wake-up call for the American economy. According to the report, the number of employed persons declined in June for the first time

Jakub Novak 09:55 2025-07-03 UTC+2

The Market Bets on Profits

The market remains confident in a positive future. It hears only what it wants to hear. Negative news is ignored, allowing the S&P 500 to set new records. It doesn't

Marek Petkovich 09:35 2025-07-03 UTC+2

What to Pay Attention to on July 3? A Breakdown of Fundamental Events for Beginners

A significant number of macroeconomic reports are scheduled for release on Thursday, including some key reports. As a reminder, U.S. labor market and unemployment data are typically released on Friday

Paolo Greco 06:53 2025-07-03 UTC+2

GBP/USD Overview – July 3: Jerome Powell Finally Responded to Trump

The GBP/USD currency pair plummeted on Wednesday like a stone. However, every drop in the pair eventually gives way to a much stronger rise. Therefore, at this point, there's

Paolo Greco 03:45 2025-07-03 UTC+2

EUR/USD Overview – July 3: One Big Trump Law Passed, Dollar at 4-Year Lows

The EUR/USD currency pair traded relatively calmly on Wednesday, although the word "calm" may not accurately describe the daily decline of the dollar. The most accurate picture of what's happening

Paolo Greco 03:45 2025-07-03 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.