empty
17.06.2025 12:39 AM
The Dollar Walks on Thin Ice

When there's money, you buy the best. In past years, the US dollar and dollar-denominated assets—especially shares of the "Magnificent Seven"—were considered the best investments. American stock indices and the US economy were far ahead of the rest. During periods of turmoil, traders would eagerly buy the US dollar as if it were in high demand. But in 2025, everything has turned upside down. The uptrend in EUR/USD is gaining momentum. Credit Agricole cites three reasons why it is likely to continue.

First, there are rising dovish expectations regarding the Federal Reserve's monetary policy. A slowing US economy and inflation's unwillingness to rise are pushing the central bank toward resuming its rate-cutting cycle.

Second, there is diminished confidence in the U.S. dollar as the primary reserve currency. The greenback still accounts for 46% of global forex reserves, gold for 20%, and the euro for just 16%. However, the European Central Bank seriously aims to promote the euro as a means of international settlement and reserve currency.

Third, trade risks are rising as grace periods expire. Donald Trump has stated he will send letters to countries outlining the tariff rates imposed against them. The White House intends to raise auto import tariffs from 25% to 50%. Given the USD index sell-off on U.S. Independence Day, it can be assumed that any escalation of trade wars will benefit EUR/USD. Unsurprisingly, speculators continue to increase short positions against the U.S. dollar.

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

This image is no longer relevant

It's difficult to gauge how the Israel-Iran standoff will affect the main currency pair. On one hand, rising geopolitical risks in the Middle East are negative for the U.S. dollar, which has lost its safe-haven status. The dollar is under pressure due to declining U.S. stock indices and the associated deterioration in global risk appetite.

On the other hand, rising oil prices are giving EUR/USD bears some leverage. The U.S. is a net oil exporter, while the eurozone is a net importer. Moreover, according to a Bloomberg study, a Brent rally to $100 per barrel would increase gasoline prices by 17% and push U.S. inflation to 3.2% by the end of June. Under such conditions, the Fed may choose not to cut rates in 2025.

This image is no longer relevant

How the Fed responds to the armed conflict in the Middle East will be critical. Any upward revision of inflation forecasts or a scaling back of expected monetary easing for this year would be interpreted by investors as a signal to sell EUR/USD. The euro will likely break through its local highs if those fears don't materialize.

Technical outlook on the daily EUR/USD chart shows that bulls intend to play out an inside bar pattern. A breakout above the upper boundary near 1.1615 would allow for an increase in long positions initiated at the 1.149 support rebound.

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

Market fears retaliation

Hope for the best, prepare for the worst. Since the onset of the Israel-Iran conflict, the market seems to have largely ignored the severity of the situation. Investor reaction

Marek Petkovich 10:36 2025-06-23 UTC+2

The U.S. Joins the Iran-Israel War. What's Next for the Markets? (Limited downside potential for #NDX and #SPX contracts possible)

The United States could not abandon its satellite and Middle Eastern proxy—Israel—to face Iran alone. On Sunday, it struck Iran's nuclear facilities, though these strikes failed to achieve their objectives

Pati Gani 09:51 2025-06-23 UTC+2

What to Pay Attention to on June 23? A Breakdown of Fundamental Events for Beginners

A significant number of macroeconomic reports are set for Monday, though they share a similar nature. Business activity indices for June's services and manufacturing sectors will be released in Germany

Paolo Greco 06:51 2025-06-23 UTC+2

GBP/USD Overview – June 23: Geopolitics vs. Economy

The GBP/USD currency pair traded sluggishly throughout Friday, but one technical factor is worth noting: the price failed to consolidate above the moving average. Thus, technical analysis currently suggests

Paolo Greco 03:50 2025-06-23 UTC+2

EUR/USD Overview – June 23: The U.S. Has Officially Entered the War Against Iran

The EUR/USD currency pair traded with minimal volatility and no clear direction throughout Friday. The upward trend remains intact without any doubt. However, a significant strengthening of the U.S. dollar

Paolo Greco 03:50 2025-06-23 UTC+2

US-EU Negotiations on the Verge of Collapse

As anticipated, this phrase can describe nearly every action taken by Donald Trump. I have consistently argued that the core of any negotiations involving Trump comes down to this

Chin Zhao 00:13 2025-06-23 UTC+2

Iran Preparing a "Long-Term Response" to the US

Only a few hours have passed since the overnight airstrike by American bombers on Iranian nuclear facilities—and already, missiles are flying in the opposite direction. However, they are not targeting

Chin Zhao 00:13 2025-06-23 UTC+2

EUR/USD: Prepare for Price Turbulence

The economic calendar for the upcoming week is packed with important releases and events. However, all of them will be overshadowed by geopolitical developments—or rather, one specific event that took

Irina Manzenko 00:13 2025-06-23 UTC+2

U.S. Dollar: Weekly Preview

The United States brings many important economic events. Additionally, as I have mentioned several times, the ongoing war in the Middle East could greatly influence market sentiment. As a result

Chin Zhao 00:12 2025-06-23 UTC+2

British Pound: Weekly Preview

The dynamics of the British pound will also not be driven by the pound itself or domestic UK news. The reasons are the same: the U.S. involvement in the Middle

Chin Zhao 00:12 2025-06-23 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.