In order to buoy the value of the US currency, tariffs should not damage the US economy. However, this scenario is out of consideration, as US President Donald Trump has decided to maintain his current approach. Let’s discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- US policy volatility is a reason to avoid the greenback.
- Donald Trump’s tariffs will hurt the US economy.
- The EURUSD pair has started an uptrend.
- The euro can be bought on pullbacks with targets at 1.16 and 1.195.
Weekly US Dollar Fundamental Forecast
Will the US dollar be able to recover? If trade wars and US protectionist policies are put to rest, the US economy will not be severely harmed, and the US dollar can be supported. The cooling of the US economy, coupled with growing distrust in US assets, is causing irreparable damage to EURUSD bears. This is not temporary; it is a serious structural change that could take the major currency pair to 1.3 in 2026.
This trend is further exacerbated by President Trump’s ongoing commitment to reshape the global economic landscape, which casts a shadow over the future of the US dollar. While the Wall Street Journal’s experts had predicted 2% GDP growth in 2025, they have since revised this estimate to 0.9%. They also raised the probability of a recession over the next 12 months from 22% to 45%.
US GDP Forecasts
Source: Bloomberg.
US GDP forecasts range from a 2% contraction to a 3.1% expansion. Pessimists point to falling consumer sentiment and the impact of tariffs on supply chains. Conversely, optimists express confidence in the efficacy of Donald Trump’s diplomatic approach and anticipate the swift elimination of tariffs.
This wide range of views is hardly extraordinary. The US President has stated that his tariffs will not change, eventually suspending them. He has also indicated that higher duties may be implemented if trade agreements are not reached.
The exemption of smartphones, computers, and some other electronic devices from tariffs is another example of this, encompassing $390 billion worth of shipments, including $100 billion from China, which is equivalent to approximately 23% of China’s imports to the US. While markets initially reacted positively, the subsequent developments led to a shift in sentiment. It was revealed that Donald Trump has a separate tariff on these goods. The nature of this tariff is yet to be determined.
This added uncertainty has led to a decline in investor demand for US assets. Hedging purchases of the US dollar for the first time in five years exceeded the interest in insuring its sales, the highest levels since the pandemic.
US Dollar Index Risk Reversal
Source: Bloomberg.
Given the acceleration of inflation in the US in 2025 from January’s 2.7% to 3.6%, as predicted by Wall Street Journal experts, the Fed is unlikely to cut rates, which will further slow the growth of the US economy. Furthermore, experts have noted that high prices are only temporary. In 2026, they predict a slowdown to 2.6%.
Weekly EURUSD Trading Plan
Since the EURUSD pair has started a bullish trend, one can consider long trades with targets at 1.16 and 1.195 on pullbacks, triggered by bearish pressure amid rumors that tariffs on electronics will be canceled or the ECB will cut the deposit rate.
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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