empty
03.06.2025 12:38 AM
EUR/USD. The Dollar Falls Out of Favor Again

The euro-dollar pair is once again attempting to breach the 1.14 figure. This is far from the first attempt by EUR/USD buyers over the past two months. At the end of April, traders even briefly touched the 1.15 figure, reaching 1.1574, but failed to hold their positions, and the pair dropped nearly 500 pips.

This image is no longer relevant

Interestingly, all these price fluctuations were driven by the same underlying reasons. The news triggers may vary, but the essence remains the same: whenever signs of de-escalation in the trade war appear, the dollar strengthens. Conversely, when tensions rise, the greenback weakens sharply. Hence, the extent of price fluctuations. There's no clear pattern (as the "negotiation track" is highly unpredictable), but distinct phases are characterized by either an increase or decrease in risk aversion.

We are witnessing a phase of dollar weakening, which is reacting sharply to the latest surge in U.S.-China tensions. Therefore, the future trajectory of EUR/USD will depend on how events unfold. If escalation continues (for instance, if Trump reinstates 145% tariffs on Chinese goods ahead of schedule), the dollar will weaken further; if de-escalation occurs (such as news of a planned meeting or phone call between Xi Jinping and Trump), the greenback could quickly regain lost ground.

As of today, there are no signs of reduced tensions. On the contrary, after Trump accused China of violating agreements, Beijing responded with similar accusations against Washington. Moreover, China accused the U.S. of a "serious violation" of the trade truce and threatened retaliatory measures.

Recently, the U.S. has taken several unfriendly steps that were predictably unwelcome by Chinese authorities. For example, the U.S. threatened sanctions against any entity using new Huawei chips, claiming these processors contain or were made with American technologies, potentially violating U.S. export controls. In response, China threatened sanctions against those adhering to American restrictions.

Further, last week, U.S. Secretary of State Marco Rubio (a noted "hawk" on China) announced that America would "aggressively revoke visas for Chinese students" and that new visa applications from China and Hong Kong would undergo stricter scrutiny. Rubio asserted that many Chinese students have ties to the Communist Party while studying at U.S. universities and gaining "critical information."

The final blow came from U.S. Treasury Secretary Scott Bessent, who expressed that further escalation could only be resolved with a direct phone call between Trump and Xi Jinping. However, he couldn't confirm whether such a call was scheduled.

Recall that Trump promised a phone conversation with Xi immediately after their Geneva meeting on May 11, claiming it would happen by the end of that week. Yet, nothing materialized, and tensions have only escalated since.

Thus, the dollar is again under pressure, and EUR/USD is trying to consolidate within the 1.14 figure.

The official statement from China further fueled tensions. A representative from China's Ministry of Commerce condemned the new U.S. restrictions and stated that if Washington continues undermining Chinese interests, "Beijing will take radical steps to defend its legal rights." Specific measures weren't disclosed, but the confrontational tone was unmistakable.

Additional pressure on the dollar came from Trump's Friday announcement to double tariffs on imported steel and aluminum from 25% to 50%, increasing the burden on global steel producers and exacerbating the global trade war.

It's also worth noting that despite Trump's optimistic statements about the prospects of a deal with the EU, negotiations with Brussels remain difficult and thus far fruitless. Analysts at Bruegel suggest that an agreement between the EU and the U.S. is "unlikely to be reached within the 90-day deadline set by the American president." This means that by July 9, Trump may fulfill his threat and raise tariffs on European goods to 50%.

In other words, the current fundamental backdrop supports further weakening of the greenback and a corresponding rise in EUR/USD. It makes sense to use corrective pullbacks to open long positions. The first target for the upward movement is 1.1450 (the upper line of the Bollinger Bands on the D1 timeframe). The main target is 1.1570 (the upper line of the Bollinger Bands on W1).

Irina Manzenko,
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

Powell, Trump, and Everyone Else

What will change with the arrival of a new Federal Reserve Chair? This is a rather important question, and the answer to it may already have implications for the U.S

Chin Zhao 00:08 2025-06-27 UTC+2

AUD/USD. Resistance Level 0.6600 on the Horizon

The Australian dollar tested a significant resistance level at 0.6550 on Thursday, which corresponds to the upper line of the Bollinger Bands indicator on the D1 timeframe. This

Irina Manzenko 00:08 2025-06-27 UTC+2

USD/JPY. Analysis, Forecast, and Current Market Situation

Intraday demand for the Japanese yen remains steady, accompanied by broad-based U.S. dollar weakness, contributing to the decline in the USD/JPY pair. Rising expectations that the Bank of Japan

Irina Yanina 12:55 2025-06-26 UTC+2

XAU/USD. Analysis and Forecast

Gold prices are showing moderate gains for the second consecutive day, though they remain below the 3,350-dollar level. Intraday demand for the Japanese yen persists alongside broad U.S. dollar weakness

Irina Yanina 12:34 2025-06-26 UTC+2

USD/CHF. Analysis and Forecast

The USD/CHF pair has remained under pressure for the fourth consecutive day, falling back to levels last seen in 2011. Bearish sentiment toward the U.S. dollar persists amid concerns over

Irina Yanina 12:04 2025-06-26 UTC+2

Trump Again Criticizes the Fed for Being Too Slow

On Wednesday, the U.S. dollar sharply declined against major currencies after President Donald Trump stated that he has three or four candidates in mind to replace Federal Reserve Chair Jerome

Jakub Novak 10:59 2025-06-26 UTC+2

Investors Recall the Chronic Weakness of the Dollar (Further Decline in #USDX and USD/JPY Possible)

The markets continue to be dominated by the theme of Iran-Israel negotiations, previously initiated by the United States. Whether actual agreements are reached or not will have a noticeable impact

Pati Gani 09:19 2025-06-26 UTC+2

The Market Has Found a Cure for All Troubles

It seems that the heavens are aligned with Donald Trump's desires. The U.S. President's successes in the Middle East have led to a new perspective on the policies pursued

Marek Petkovich 09:04 2025-06-26 UTC+2

What to Pay Attention to on June 26? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic reports are scheduled for Thursday, and the market this week has shown a clear intention to continue the upward trend that has lasted for five months. Yesterday

Paolo Greco 07:16 2025-06-26 UTC+2

GBP/USD Overview – June 26: July 9 Is Approaching

The GBP/USD currency pair remained stagnant for most of Wednesday. Let's recall an old technical signal: if the price updates a significant extreme and immediately pulls back, there

Paolo Greco 03:39 2025-06-26 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.