US Dollar Pins Near Multi-Year Lows. Forecast as of 07.07.2025
The US administration has stated that the absence of trade agreements with the US by August 1 will result in the reintroduction of tariffs imposed on April 2. Let’s discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- The US administration does not intend to impose higher tariffs on July 9.
- Extending the delay until August 1 will improve risk appetite.
- The US dollar is the main victim of the tariffs.
- Long trades on the EURUSD pair can be considered on a rebound from support levels at 1.1715, 1.167, and 1.1635.
Weekly US Dollar Fundamental Forecast
In some cases, the absence of information can be a positive development. The US administration’s decision not to send a letter on tariffs over the weekend is likely to be welcomed by financial markets. Otherwise, these messages would have contained sensitive information. For instance, the import duties are 70%. It is evident from the statements made by members of Donald Trump’s administration that he is not escalating the situation. This is a bullish factor for the S&P 500 index. However, the future performance of the US dollar remains uncertain.
According to UBS Global Wealth Management, the most unfavorable outcome for the markets would be the introduction of higher tariffs for all trading partners. This would likely lead to the widespread adoption of risk-aversion strategies. If the US administration postpones the tariffs, investors may interpret this as a reluctance to enforce them. Commerce Secretary Howard Lutnick’s statement that import duties will be implemented on August 1, and Scott Bessent’s speech indicate that the second option is currently on the table.
Top 10 Countries Importing Goods into US
Source: Bloomberg.
According to the finance minister, Donald Trump will inform countries in letters that if they do not make progress by August 1, they will face the tariffs set on April 2. The letters will specify the deadline by which trading partners will need to reach a deal with the US to avoid the severe tariffs. In essence, the US administration is offering another extension, leading to a further improvement in global risk appetite. How will the US dollar react?
The surge in trade policy uncertainty, which peaked on the Liberation Day, weakened the US dollar. Investors expressed concerns that large-scale tariffs could potentially lead to an economic recession, leading them to sell all US assets. The 90-day delay was perceived as a de-escalation of trade conflicts, which caused the USD and S&P 500 indices to move in different directions. The broad stock index demonstrated resilience, rebounding from recent losses to reach record highs, while the US dollar experienced a decline. Notably, the currency has been particularly impacted by the US administration’s protectionist policies.
Trade Uncertainty Index
Source: Wall Street Journal.
Based on current circumstances, it is unlikely that there will be any significant changes in the near future. It is evident that the markets have accurately assessed Donald Trump’s stance. He anticipates a rise in the S&P 500 and a decline in the US dollar. Indeed, our aspirations frequently diverge from our capabilities. The president’s capabilities are significant. In the current environment, with its many uncertainties, it is essential for traders to develop trading strategies that align with the prevailing narrative, aligning with the objectives of the US administration.
Weekly EURUSD Trading Plan
Given these conditions, the EURUSD pair will likely reach 1.2 and 1.22 in 2025. Long trades on the main currency pair can be opened on rebounds from support levels of 1.1715, 1.167, and 1.1635, or on a breakout of the resistance level of 1.181.
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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