US Dollar Retreats As Its Strength Questioned. Forecast as of 27.11.2025
At the beginning of the year, many predicted that the US dollar would rise, but dollar bulls turned out to be wrong. Now, a bearish consensus is forming in the market. However, will sellers end up in trouble? Let’s discuss this topic and make a trading plan for the EUR/USD pair.
The article covers the following subjects:
Major Takeaways
- By the end of 2025, the US dollar will weaken.
- The forecasts for the greenback in 2026 are bearish.
- The USD index may surprise investors.
- Long trades on the EUR/USD pair can be opened with targets of 1.2 and 1.22.
US Dollar Fundamental Forecast For Six Months
The EUR/USD pair has continued its rally. There are also plenty of bullish forecasts from major banks. Long positions formed at 1.149 and 1.1535 are a sound strategy. However, the higher the euro rises, the more doubts there are. What if something goes wrong?
When there are too many bulls or bears in the market, it feels somehow unsettling. Let’s remember how the US dollar started 2025. Donald Trump’s victory in the presidential election painted a bright future for the greenback. The US imposed tariffs aimed at slowing economic growth abroad and reinforcing American exceptionalism. At the same time, inflation in the United States will accelerate, forcing the Fed to keep interest rates high.
Germany’s GDP Growth Forecast
Source: Bloomberg.
In fact, the exact opposite occurred. America’s Liberation Day and the highest tariffs since the 1930s caused the USD index to fall by 10% in the first half of the year. Friedrich Merz’s fiscal stimulus measures added more pressure, forcing the IMF to raise its forecasts for the German economy.
In 2026, the greenback will start off with bearish sentiment. Bears are dominating the market, and Deutsche Bank expects EUR/USD quotes to reach 1.25. The main reasons will be improving global economic growth, the unfolding cyclical upturn in Europe led by Germany, a potential Russian-Ukrainian peace agreement, and an increase in the share of the euro in gold and foreign exchange reserves. In addition, consider the aggressive monetary expansion of the Federal Reserve, pressure on the Fed from the US administration, and eroding confidence in the US dollar, and all becomes clear. The major currency pair is poised to resume its upward trend.
Market Expectations for December Rate Cut
Source: Bloomberg.
However, this scenario may not unfold. The difference in central bank rates favors the US dollar. The longer they remain at their current levels, the greater the likelihood of capital flowing into North America, driven by the attractiveness of its assets.
It is not a given that the US economy will slow down. What if Donald Trump’s big and beautiful tax cut bill accelerates it? Even the longest shutdown may have no impact on GDP. According to the Treasury Department, federal spending in October increased by 18% year-on-year, despite the government shutdown.
Economic acceleration and inflation could lead not only to the holding of federal funds rates, but also to their increase. As a result, the greenback could turn from an outsider into a frontrunner.
EURUSD Trading Plan For Six Months
The likelihood of such a scenario is low. Moreover, the Hassett factor will offset the negative impact on the EUR/USD exchange rate. The euro may rise to 1.20 or 1.22 within three or six months. The recommendation is to buy.
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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