The US Dollar (USD) is under mounting pressure due to the controversial trade and monetary stance of former President Donald Trump. In contrast, the EUR/USD pair continues its bullish trajectory, fueled by a weakening dollar and a tightening stance from the European Central Bank (ECB). This report offers a data-driven outlook and trading strategy for the coming weeks.
1. US Dollar Index (DXY) – A Sharp Decline
1.1 A 7% Year-To-Date Drop
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The US Dollar Index has fallen by 7% since the start of 2025.
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As of April 22, the index stands at 98.697, with expectations of further downside due to weakening investor confidence.
1.2 Capital Flight from US Assets
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Foreign investors are divesting:
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$19 trillion in US equities.
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$7 trillion in Treasury bonds.
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The USD share of global reserves dropped to 57.4%, down from 58.2% in 2024.
2. Trump’s Policies and Their Impact on the Dollar
2.1 Trade War Escalation
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Trump has imposed tariffs up to 25% on imports from China, the EU, and Canada.
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This move triggered fears of a broader global trade war.
2.2 Political Interference in Monetary Policy
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Trump’s public criticism of Federal Reserve Chair Jerome Powell, calling him a “big loser,” raises concerns over Fed independence, shaking market confidence.
3. EUR/USD Performance and Outlook
3.1 Bullish Momentum for the Euro
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The EUR/USD pair rose to 1.14265 (as of April 22), with projections pointing toward 1.16 and possibly 1.195 in the coming weeks.
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The trend is backed by a weakening USD and a comparatively hawkish ECB.
3.2 ECB's Tightening Stance
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The ECB is leaning toward further tightening, contrasting with expectations of monetary easing by the Fed.
4. Weekly Outlook for the US Dollar
4.1 Continued Downside Potential
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The DXY is projected to slide toward 97.68, its 52-week low, amid ongoing political and economic uncertainty.
4.2 Inflation Pressures and Fed Dilemma
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US inflation hit 3% in January 2025, potentially forcing the Fed to raise rates despite Trump’s demands for cuts.
4.3 Global Reactions and Retaliatory Measures
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China and the EU are preparing to impose counter-tariffs, further increasing the risk of a global slowdown.
5. EUR/USD Weekly Trading Strategy
5.1 Current Market Structure
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The pair remains in a bullish trend driven by USD weakness and geopolitical tensions.
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Key support: 1.1201 – 1.1174.
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Key resistance: 1.1473 (April high).
5.2 Buy Strategy Plan
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Entry points:
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On bounce from support (1.1201–1.1174).
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On breakout above 1.1473.
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Profit targets:
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First target: 1.16 (psychological level).
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Second target: 1.195 (long-term resistance).
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Stop-loss: Below 1.1122 to manage risk.
5.3 Key Warnings
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Sudden statements from the Fed or a rollback on tariffs could reverse current trends.
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Closely monitor inflation data from the US and economic indicators from the Eurozone.
6. Key Risks and Catalysts
Bearish Risks
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Escalation in trade tensions with China and the EU.
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Market distrust in the Fed’s independence.
Bullish Catalysts
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Possible new trade deals or easing of tariffs.
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Improvement in US GDP growth and labor data.
As Trump's aggressive economic policies and political interventions weigh heavily on market sentiment, the US Dollar is expected to remain under pressure. This weakness creates a favorable setup for a continued rise in the EUR/USD pair, targeting levels of 1.16 and 1.195. Traders are advised to adopt a buy-on-dip strategy while maintaining strict risk management and closely watching geopolitical and monetary policy developments.