US Dollar Acts As Risky Currency. Forecast as of 11.07.2025
The USD index no longer rallies due to the surge in volatility. Meanwhile, the US dollar is trading as a risky currency. Its direct correlation with the S&P 500 reopens the discussion about American exceptionalism. Let’s discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- Investors have turned to US assets as the S&P 500 index has reached a new all-time high.
- Treasury auctions show strong demand.
- The US dollar is performing like a risky asset.
- Short trades on the EURUSD pair can be opened if the quotes fail to remain above 1.168.
Weekly US Dollar Fundamental Forecast
In the current market environment, events unfold extremely rapidly, and yesterday’s winners become today’s losers. While Goldman Sachs is discussing the risky nature of the US dollar, I would ask other questions. Is American exceptionalism experiencing a resurgence? If so, the EURUSD pair is likely to undergo a correction.
Despite the recent surge in tariffs, stock indices continue to demonstrate resilience, showing no signs of the same decline seen in April. Tariffs of 50% on copper and imports from Brazil, an increase in duties from Canada from 25% to 35%, and numerous letters specifying duty rates could have negatively impacted the S&P 500 index. Instead, it has reached a new record high due to the absence of fears that the US administration’s protectionism will lead the US economy into recession.
US Dollar and G7 Currencies Volatility
Source: Bloomberg.
A few days ago, investors believed that the greenback would be the main victim. It restored its historical inverse correlation with the S&P 500, which suggested a return to the US dollar’s status as a safe-haven asset. However, according to Goldman Sachs, the US dollar remains a risky currency due to its lack of correlation with the volatility of G7 currencies.
At the same time, the bank notes that in 2025, sell-offs in the greenback along with US stocks occurred twice as often as in the last decade. In my professional assessment, this issue can be attributed to investors rapidly shifting from the “sell America” approach to the “buy America” strategy.
Indeed, concerns about a US economic downturn have not materialized. This is not the sole factor contributing to the resurgence of American exceptionalism. In April, there were concerns that major foreign holders of Treasuries would sell them due to the impact of tariffs. While non-residents may have had less incentive to purchase Treasury bond yields, the most recent auctions for 10- and 30-year securities demonstrated robust demand.
Donald Trump attempted to redirect the Fed’s focus from addressing inflation issues to tackling those related to the government. This concept is referred to as fiscal dominance, which can result in a depreciation of the currency along with an increase in stock indices. However, Jerome Powell’s stance has proven to be resilient. He is determined to maintain his position. However, there are other factors that drive the US dollar down.
US and European Relative Market Cap to MSCI World
Source: Bloomberg.
The EURUSD pair’s rally in the first half of the year was driven, in part, by the outperformance of European stocks over US stocks. However, between July and December, the situation may change significantly. If exceptionalism becomes the prerogative of the US again, the major currency pair will likely face a correction.
Weekly EURUSD Trading Plan
The trading plan for the EURUSD pair remains the same. If the euro fails to stay above 1.168, the currency will likely face a sell-off.
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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