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

AUD/JPY. Analysis and Forecast

The AUD/JPY pair is regaining positive momentum after a modest pullback the previous day. However, spot prices remain confined within a multi-day range due to mixed fundamental signals, trading near

Irina Yanina 14:39 2025-06-20 UTC+2

USD/CHF: The Pair Struggles to Gain Momentum Amid Conflicting Forces

At present, USD/CHF shows no clear intraday direction and fluctuates within a narrow range just above the 0.8155 level, reflecting market uncertainty during the European session. The Swiss franc

Irina Yanina 14:36 2025-06-20 UTC+2

The Euro Will Retain Its Strength and Investor Interest

During her speech, IMF Managing Director Kristalina Georgieva stated that she sees the potential for the euro to play a broader role globally.Her remarks came amid growing geopolitical instability

Jakub Novak 11:25 2025-06-20 UTC+2

Euro Slightly Rises After Lagarde's Speech

The euro saw a modest recovery after European Central Bank President Christine Lagarde stated that expanding trade within the region could help offset losses resulting from global fragmentation. Her optimistic

Jakub Novak 11:10 2025-06-20 UTC+2

Donald Trump – A Mastermind of Geopolitical Uncertainty (A Potential Correction in Oil and Gold Prices)

Six months into Donald Trump's presidency, it seems he has already thoroughly exhausted the world with his "brilliant" initiatives, groundbreaking actions aimed at making America great again, and his vivid

Pati Gani 09:49 2025-06-20 UTC+2

The Market Tries to Extinguish the Fire

Markets are digesting Donald Trump's announcement that a decision on U.S. strikes against Iran will be made within two weeks. The White House could have acted at any moment

Marek Petkovich 09:01 2025-06-20 UTC+2

What to Pay Attention to on June 20? A Breakdown of Fundamental Events for Beginners

There are very few macroeconomic reports scheduled for Friday. The only report of the day will be the UK retail sales report. No economic data will be released today

Paolo Greco 07:45 2025-06-20 UTC+2

GBP/USD Overview – June 20: The Bank of England Didn't Surprise

The GBP/USD currency pair traded relatively calmly on Thursday, given the fundamental backdrop available to the market. On Wednesday evening, the Federal Reserve announced the results of its latest meeting

Paolo Greco 07:16 2025-06-20 UTC+2

EUR/USD Overview – June 20: Summing Up the Fed Meeting

The EUR/USD currency pair traded relatively calmly on Wednesday and Thursday. Recall that the results of the latest 2025 Federal Reserve meeting were announced on Wednesday evening, but we didn't

Paolo Greco 07:16 2025-06-20 UTC+2

USD/JPY. Analysis and Forecast

The Japanese yen is showing weakness against the stronger U.S. dollar, with the USD/JPY pair reaching a new monthly high. This rise in the dollar against the yen is mainly

Irina Yanina 20:12 2025-06-19 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.