Foreigners Continue to Dodge US Treasuries. Forecast as of 10.06.2025
Donald Trump’s “Big, Beautiful Bill” requires significant financial support. However, it is becoming increasingly difficult to attract non-residents to US Treasuries, which is exerting pressure on the US dollar. Let’s discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- Tariffs reduce US imports and Chinese exports.
- The US administration’s influence is waning.
- Foreigners are reluctant to buy Treasuries.
- Short trades opened on a breakout of 1.1385 and 1.137 can be closed, after which there will be an opportunity to resume buying.
Weekly US Dollar Fundamental Forecast
Tariffs are proving to be effective. Following a record decline in US imports in US dollar terms, Chinese exports to the US fell by 35%. The US trade deficit is showing signs of improvement. However, rather than increasing pressure on other countries, Donald Trump is retreating. The US dollar is weakening in value as a result of his policies. While the EURUSD pair failed to break through the 1.15 threshold, it is premature to discuss a reversal of the upward trend.
Chinese Exports to US
Source: Bloomberg.
According to the Wall Street Journal, the US president has instructed his negotiating team to lift restrictions on the sale of jet engines and related parts, software, and ethane to China. The situation is further complicated by Beijing’s export controls on rare earth minerals, a crucial resource for American industry.
The US economy is in a state of distress. However, this is not the sole factor weakening Donald Trump’s leverage over other countries. The US trade court’s ruling that the tariffs are illegal, along with concerns that foreigners will cease purchasing US assets, is prompting the US administration to adopt a more conciliatory stance.
The rise in the US net international investment position’s negative balance is due to the accumulation of a foreign trade deficit. Non-residents sold their goods to the US, received US dollars, and invested them in US assets. Tariffs disrupt this scheme. Notably, the smaller the difference between exports and imports, the lower the demand for US Treasuries from abroad.
Trade Balance and Net International Investment Position
Source: Wall Street Journal.
Washington is in dire need of financial resources. Donald Trump’s substantial bill requires substantial financing. No alternative approach has yet emerged that surpasses the effectiveness of issuing bonds. However, if non-residents do not generate dollars from exports, there will be no foreign capital available to purchase US Treasury bonds. To attract buyers to the auctions, the Treasury should devalue the US dollar.
The EURUSD pair has declined recently due to the stronger-than-expected US economy and Donald Trump’s retreat from his intentions. This is not merely a matter of tariffs. Earlier, the US administration unsettled investors by discussing the possibility of fiscal consolidation. In essence, the objective was to implement a cost-cutting strategy in the short term in exchange for long-term benefits. However, this scenario has changed, enabling stock indices to flourish and providing a foundation for the US dollar’s strength.
Weekly EURUSD Trading Plan
Against this backdrop, the risks of a correction in the EURUSD pair are increasing, but there is no reason to doubt the strength of the upward trend. Short-term sales on a breakout of the support levels of 1.1385 and 1.137 can be closed, and medium-term purchases on a decline in the main currency pair can be considered.
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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