Weekly US Dollar Fundamental Forecast
Tariffs may be delayed but not ruled out entirely. President Donald Trump’s decision not to jolt the stock market suggests a deliberate approach to policy implementation. This is further evidenced by the President’s recent remarks regarding 25% tariffs on imports from Mexico and Canada and 10% on those from China, effective from February. If these tariffs are implemented, the EURUSD pair will likely resume its downtrend.
Following the USD index’s 7% rally since September, investors are grappling with the question of whether Donald Trump’s protectionist policies have been fully reflected in the USD exchange rate. Morgan Stanley voiced skepticism in this regard, while Bank of America expressed a contrary view, anticipating that concerns over broad import duties will bolster the greenback. Even if these tariffs are postponed, import duties imposed on other countries are expected to remain a pivotal element of the White House’s policy agenda.
Average Rate on All US Imports
Brown Brothers Harriman prefers to set tariffs aside and believes that the US dollar will continue to strengthen. Import duties will only add to the factors that have been driving the USD index higher.
Notably, the US dollar is a safe-haven asset. It strengthens thanks to increased volatility, as evidenced by the rally on the back of a spike in the US trade policy uncertainty index. In fact, uncertainty has not disappeared. Investors have adopted a more relaxed stance, likely due to the absence of universal tariffs on inauguration day.
US Dollar Performance and US Trade Policy Uncertainty
Indeed, traders should look far beyond tariffs, considering the implications of Donald Trump’s policies, which are likely to be pro-inflationary. Fiscal stimulus increases spending, while deportations lead to labor shortages and higher wages, and import duties disrupt supply chains. The US Fed will have to postpone further rate decisions for longer.
Other concerns appear to be more speculative. The recent disclosure by Bloomberg regarding the US administration’s plans to strengthen currency controls has led to rumors about the potential expansion of the list of manipulators. However, it is anticipated that the US will force other countries to strengthen their national currencies against the greenback. At the same time, trade wars should lead to the devaluation of currencies to offset the negative impact. In my opinion, the US dollar has no cause for concern.
Weekly EURUSD Trading Plan
Despite his recent comments, it appears that Donald Trump has not abandoned his plans to impose tariffs. Moreover, he is preparing the markets for their introduction. As a result, any upward movements in the EURUSD exchange rate are likely to be short-lived. If the price breaks through the resistance level of 1.0445, one can open more long trades, adding them to the ones initiated at 1.0335. However, traders should expect a trend reversal near 1.047 and 1.054.
Myanfx-edu does not provide tax, investment or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors.
Go to Register with LiteForex Platform
Financial Trading is not suitable for all investors & involved Risky. If you through with this link and trade we may earn some commission.
