Escalating trade conflicts, capital outflows resulting from tax burdens on investment, and the recession in the US economy could negatively impact American stock indices and the US dollar. Let’s discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Ключевые факты
- The US administration is nearing its limit of patience.
- The USD index may drop by 5% due to investment taxes.
- The Fed is expected to slash the interest rate in 2026.
- Long trades on the EURUSD pair can be opened on a rebound from 1.133, 1.128, and 1.1225.
Фундаментальный прогноз по доллару на неделю
Speculators continue to inflate the US stock market bubble. The S&P 500 index is rising, forcing the EURUSD pair to retreat. However, the bubble will inevitably burst at some point due to the ongoing trade war, recession risks, and fiscal problems. The US dollar is likely to weaken significantly. However, it remains resistant for the time being.
The White House has reached out to numerous countries, encouraging them to submit their most competitive trade proposals swiftly. The deadline is approaching, with only a limited timeframe remaining before the start of July. At the same time, tariffs may rise in the future. However, the ongoing legal battle over the legality of US import duties may impact the timeline. According to UBS, President Trump’s patience with the current state of affairs is waning. He is expected to raise tariffs, which could lead to an escalation in trade conflicts and hurt the US dollar.
Another potential issue is the bill to impose taxes on non-residents who own US securities if their countries pursue discriminatory policies toward the United States. According to estimates by the Joint Committee on Taxation, the measure will generate $116.3 billion in revenue over the next decade. However, according to Allianz, this will result in increased oversight of capital movements, potentially leading to a 10% decline in stocks and a 5% decrease in the USD index. Treasury yields are expected to rise by 1.5 percentage points.
OECD Forecasts for World’s Leading Economies
Source: Bloomberg.
The issue of a looming recession in the US appeared to have receded to the sidelines. However, the OECD’s downward revision of its global economic forecasts has re-ignited the discourse. The Paris-based organization lowered its US GDP forecast the most, by 0.6 percentage points to 1.6% in 2025. The primary reasons cited for this decline included the uncertainty surrounding White House policy, the implementation of retaliatory measures by other countries, and a slowdown in immigration.
Inflation in the US is expected to accelerate to 3.9%, and a stagflation scenario will force the Fed to keep rates on hold until the end of 2025. Some FOMC members believe that the surge in consumer prices due to tariffs will be short-lived. However, Atlanta Fed President Raphael Bostic has raised concerns about this scenario. He observes that when tariffs are implemented simultaneously, the implications are readily apparent. However, the gradual implementation of tariffs has the potential to transform high inflation into a persistent economic challenge.
Market Expectations on Fed Interest Rate
Source: Bloomberg.
Meanwhile, the futures market is predicting two acts of monetary expansion in 2025, although the timeline is gradually shifting to 2026. Therefore, the US dollar is expected to weaken significantly, whether this year or next.
Weekly EURUSD Trading Plan
The slowdown in European inflation to 1.9%, the unexpected growth in US job openings, and the S&P 500 rally are allowing bears to push EURUSD quotes lower. As a result, the pair can be purchased on a rebound from support levels at 1.133, 1.128, and 1.1225.
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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