Investors fear a repeat of the US dollar sell-offs of the 1980s and 2000s. Therefore, the slightest signals are a reason to buy the EUR/USD pair. Conversely, when they do not occur, the pair falls. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- History may repeat itself with the dollar falling.
- Interventions or “Sell America” are reasons to buy the euro.
- The shutdown is extending the Fed’s pause.
- Short trades are relevant as long as the EUR/USD pair trades below 1.1835.
Weekly US Dollar Fundamental Forecast
We should pay less attention to what people loudly tell us we want to hear and more to what they do. The markets consider Kevin Warsh the toughest hawk among Donald Trump’s nominees. It does not matter what words he used to convince the US president. What matters is what the former FOMC official will do. Against the backdrop of the growth of business activity in the US manufacturing sector to its highest level since 2022, as well as a partial US government shutdown, EUR/USD bears managed to gain ground.
US Dollar Index Performance
Source: Nordea.
Despite the significant weakening of the US dollar in 2025–2026, its trade-weighted index remains at historically high levels. Since the 1970s, it has peaked three times. The collapse from the first peak occurred in 1985 after the US reached the Plaza Accord with other countries. At that time, the US often stated that a strong currency reduces the competitiveness of American companies.
The second sharp sell-off occurred after the dot-com bubble burst in the early 21st century and was driven by both the bursting of the Internet bubble and the associated “Sell America” strategy.
History repeats itself. Investors are beginning to get rid of the US dollar at the first signs of a repeat of those two sell-offs. Whether it is rumors of coordinated intervention by Washington and Tokyo to collapse the USD/JPY pair or the launch of sales of everything American due to Donald Trump’s tariffs. Non-residents really do hold such large amounts of US assets that a split within the West or an investor flight from Big Tech could severely damage US stocks and the dollar.
US Securities Owned By Non-Residents
Source: Bloomberg.
The opposite is also true: if signals are received but not acted upon, the markets will return to the greenback. As soon as US Treasury Secretary Scott Bessent announced that the United States was not participating in currency interventions to strengthen the yen, EUR/USD quotes plummeted from their January peak. As soon as Donald Trump chose Kevin Warsh, the “Sell America” process stalled, and the main currency pair accelerated its decline.
The US dollar is supported by both strong macroeconomic data and a partial government shutdown. It is forcing the BLS to postpone the publication of US employment data. The Fed is helpless without this data. Until the statistics are available, it is difficult to guess what is happening in the labor market and make a decision on interest rates. The pause in the cycle of monetary expansion is dragging on, allowing the greenback to feel right at home.
Weekly EURUSD Trading Plan
In such conditions, short positions on the EUR/USD pair formed at 1.193 and 1.1895 and increased at 1.1835 look like a sound strategy. The key resistance level has shifted to 1.1835. As long as the price remains below this level, the focus should remain on selling.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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