The Dollar Got a Gift. Forecast as of 05.05.2025
When GDP shrinks, Donald Trump blames the previous president; when jobs grow, he takes the credit. If you don’t pat yourself on the back, who will? Let’s discuss it and make a trading plan for EUR/USD.
The article covers the following subjects:
Major Takeaways
- U.S. job growth came as a pleasant surprise.
- Donald Trump is thrilled with economic wins.
- The Fed can afford to do nothing.
- A breakout above $1.1355 is a reason to build up EUR/USD longs.
Weekly Fundamental Forecast for Dollar
Everyone has their heroes. The strong April jobs report reinforced market confidence in Donald Trump. The S&P 500 climbed on the White House leader’s claim that the economy is strong and tariffs are bringing in billions. And this is just the start! Treasuries fell, and their yields rose, as investors bet that strong data lowers the odds of a Fed rate cut. As a result, EUR/USD is pacing like a caged tiger.
According to a Wall Street Journal insider, Donald Trump is growing more confident in his policies’ effectiveness, fueled by rallying stock indices and solid labor market data. April saw job growth of 177,000, beating forecasts, with unemployment anchored at 4.2%. The report stunned investors who expected weakness after a string of disappointing data.
US Employment and Unemployment Trends
Source: Bloomberg.
In truth, there’s no need for surprise. Front-loading of U.S. imports is temporarily boosting jobs in related sectors. Government workers laid off by Elon Musk are still receiving benefits and counted as employed. The shockwave won’t hit until September. Finally, the deportation of immigrants reduces the labor force and initially leads to a decline in the unemployment rate.
For now, the U.S. economy has a shiny facade, allowing the Fed to stay on the sidelines. Mid-April, the derivatives market gave a 70% chance of a federal funds rate cut in June; after the jobs data, that dropped below 40%. Barclays and Goldman Sachs pushed their expectations for a monetary expansion cycle from June to July.
Trump is just getting started, but the full impact of his policies won’t show until the second half of 2025. Recession risks haven’t vanished, and the buildup of speculative net shorts on the U.S. dollar to September highs makes sense in this context. Markets rise on expectations, so why not start building positions now?
Speculative Positioning Dynamics for the U.S. Dollar
Source: Bloomberg.
Clearly, the stock market is gripped by greed. Bad news is ignored, while good news is blown out of proportion. The slightest hint of Washington-Beijing talks or Trump’s comments on tariff reductions drives S&P 500 buying, supporting EUR/USD bears.
However, when opponents have different goals, dialog grinds to a halt. Trump wants concessions; Xi Jinping wants relief. Until this asymmetry is resolved, tariffs aren’t going anywhere.
Weekly Trading Plan for EURUSD
In this environment, longs on EUR/USD opened on a rebound from $1.1285 look like the right decision. Hold these positions and build them up if resistance at $1.1355 is decisively broken.
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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