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

Could the Fed Deliver a Surprise Following Its Meeting? (Possible Renewed Decline in Oil Prices and GBP/USD Pair)

The turbulence of recent months, driven by Donald Trump's actions and the release of fresh U.S. economic data, has done little to help investors understand the true direction of asset

Pati Gani 09:50 2025-05-05 UTC+2

The Market Doesn't Dare to Go Against the Crowd

"Dance while the music plays." The S&P 500 has just completed a 9-day rally—the longest since 2024—driven by a strong U.S. labor market report and upbeat earnings from tech giants

Marek Petkovich 08:49 2025-05-05 UTC+2

GBP/USD Overview – May 5: Bank of England and Fed Meetings

The GBP/USD currency pair failed to show any decisive movement on Friday—it neither rose nor fell significantly. Many analysts interpreted the U.S. labor market and unemployment data as positive simply

Paolo Greco 06:44 2025-05-05 UTC+2

EUR/USD Overview – May 5: A New Week of Ordeals for the Dollar

The EUR/USD currency pair remained flat on Friday. The day saw both upward and downward movements. It is a notable achievement for the dollar that it has appreciated over

Paolo Greco 06:44 2025-05-05 UTC+2

EUR/USD: Weekly Preview. The May FOMC Meeting and (Possible) U.S.-China Trade Talks

The new week promises to be informative for EUR/USD traders. Most notably, the next Federal Reserve meeting, scheduled for May 6–7, will determine the central bank's future course of action

Irina Manzenko 05:53 2025-05-05 UTC+2

What to Pay Attention to on May 5? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic events are scheduled for Monday. The only noteworthy release is the ISM Services PMI from the U.S., but serious doubts exist about whether the market will

Paolo Greco 04:15 2025-05-05 UTC+2

The U.S. Dollar: Weekly Preview

The hit parade of American news and events will continue. I still believe that the most significant factor in the market is Donald Trump's decisions. It's enough to compare

Chin Zhao 00:51 2025-05-05 UTC+2

British Pound: Weekly Preview

Recent reviews for both instruments have become predictable and even somewhat dull. The entire set of factors capable of influencing market sentiment and instrument movement boils down to the President

Chin Zhao 00:51 2025-05-05 UTC+2

The Euro: Weekly Preview

For several weeks, the euro has remained in a sideways range. It seems like every analyst has already pointed this out and noted that without news from Trump, there's

Chin Zhao 00:51 2025-05-05 UTC+2

EUR/USD: Analysis and Forecast

The EUR/USD pair is attracting buyers today, breaking a three-day losing streak and attempting to build intraday momentum above the psychological 1.1300 level. This indicates a renewed interest from buyers

Irina Yanina 11:59 2025-05-02 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.