empty
19.05.2025 04:42 AM
EUR/USD Overview – May 19: The Trade War Slows Down the Dollar

This image is no longer relevant

The EUR/USD currency pair traded with a slight decline on Friday, and overall volatility has decreased after the "crazy April." The U.S. dollar has been strengthening for over a month, although this growth looks quite weak. While the dollar has managed to halt its freefall, its outlook remains uncertain and largely dependent on Donald Trump and the outcome of the global trade conflict. Let's break it down.

We've already stated that the U.S. dollar should continue strengthening if the trade war continues to de-escalate. We even allow for the possibility of the dollar returning to its original positions in the 1.03–1.04 range. After all, the dollar began its collapse from these levels when Trump started implementing tariffs, threatening both the U.S. and global economies. The global economy may not significantly impact the dollar, but the American economy certainly does.

In other words, the market dumped the dollar due to fears of recession and a significant rate cut by the Federal Reserve. However, suppose Trump and his administration manage to sign trade deals with all the countries on the "blacklist" (especially China and the EU). In that case, the terms of trade will become more favorable for the U.S. Of course, we shouldn't forget that import tariffs will inevitably reduce export volumes to the U.S. Higher prices will lower demand, and in monetary terms, the U.S. economy will take a hit. However, the U.S. budget will benefit from increased revenue.

This is a complex issue, and most experts avoid making forecasts about the U.S. economy's condition several months or a year ahead. Even if Trump secures favorable trade deals, who's to say he won't launch a new trade war or make decisions that again threaten the economy? This uncertainty is precisely why the dollar often fails to rise, even when all favorable conditions exist.

Therefore, we believe that as the trade war continues to de-escalate, the dollar will strengthen slowly and modestly. The Federal Reserve also lends some support to the U.S. currency, as its monetary policy remains hawkish. Unlike the European Central Bank and the Bank of England, it hasn't cut rates.

The dollar's long-term prospects depend entirely on Trump and his future decisions. If the U.S. president continues to upend the global order, the dollar could resume its collapse. There's no reason to expect that outcome now, so we believe the dollar will continue a weak corrective rise. On the 4-hour chart, the price remains below the moving average, indicating a downtrend. The macroeconomic backdrop continues to be mostly ignored by traders.

This image is no longer relevant

The average volatility of the EUR/USD pair over the past five trading days as of May 19 is 106 pips, which is considered high. We expect the pair to move between 1.1059 and 1.1271 on Monday. The long-term regression channel points upward, indicating a short-term uptrend. The CCI indicator recently dipped into oversold territory, which, during an uptrend, signals a trend continuation. However, the trade war still has a far greater impact on price movement than technical indicators. A bullish divergence formed a bit later, triggering a new upward swing.

Nearest Support Levels:

S1 – 1.1108

S2 – 1.0986

S3 – 1.0864

Nearest Resistance Levels:

R1 – 1.1230

R2 – 1.1353

R3 – 1.1475

Trading Recommendations:

The EUR/USD pair continues a downward correction within a broader uptrend. For months, we've consistently said we expect a medium-term decline in the euro, and this outlook hasn't changed. Aside from Donald Trump, the U.S. dollar still has no reason to weaken. But lately, Trump has been pushing for a trade truce, meaning the trade war factor now supports the dollar, which could eventually return to levels around 1.03. Under current circumstances, long positions are not relevant. As long as the price remains below the moving average, short positions remain relevant with targets at 1.1108 and 1.1059.

Explanation of Illustrations:

Linear Regression Channels help determine the current trend. If both channels are aligned, it indicates a strong trend.

Moving Average Line (settings: 20,0, smoothed) defines the short-term trend and guides the trading direction.

Murray Levels act as target levels for movements and corrections.

Volatility Levels (red lines) represent the likely price range for the pair over the next 24 hours based on current volatility readings.

CCI Indicator: If it enters the oversold region (below -250) or overbought region (above +250), it signals an impending trend reversal in the opposite direction.

Paolo Greco,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Overview for the GBP/USD pair on June 6, 2025

The GBP/USD currency pair continued its upward movement on Thursday, trading overall calmly and without any rush. There was no news for either the British pound or the U.S. dollar

Paolo Greco 05:47 2025-06-06 UTC+2

Overview for EUR/USD on June 6, 2025

The EUR/USD currency pair continued to trade very calmly on Thursday, even when the results of the ECB meeting became known. It should be noted that there was no intrigue

Paolo Greco 05:21 2025-06-06 UTC+2

The EU Economy Will Not Suffer, According to Lagarde

Today, a meeting of the European regulator took place, where the obvious and expected decision was made to lower all three interest rates by another 25 basis points. The decision

Chin Zhao 02:56 2025-06-06 UTC+2

USD/JPY. Analysis and Forecast

During the European session on Thursday, the Japanese yen maintained stability, allowing the USD/JPY pair to hold above the key 143.00 level amid a moderate rise in the U.S. dollar

Irina Yanina 12:04 2025-06-05 UTC+2

AUD/JPY. Analysis and Forecast

Today the AUD/JPY pair is attracting new buyers. Recent Chinese data, including the private Caixin survey, showed a moderate acceleration in growth in China's services sector

Irina Yanina 11:36 2025-06-05 UTC+2

USD/CAD. Analysis and Forecast

The USD/CAD pair continues to decline. Fundamental factors support bearish sentiment, indicating that the path of least resistance for spot prices remains downward. Reports of a trade agreement between

Irina Yanina 11:33 2025-06-05 UTC+2

The Market Finds Good in the Bad

Markets have risen for the third consecutive day, interpreting the current situation as widespread trading uncertainty — far from a market crash. This allows for a calmer and more rational

Marek Petkovich 09:20 2025-06-05 UTC+2

What to Pay Attention to on June 5? A Breakdown of Fundamental Events for Beginners

There are very few macroeconomic reports scheduled for Thursday. Only two secondary reports from the UK and the US are all traders will get today. The construction sector activity report

Paolo Greco 06:39 2025-06-05 UTC+2

GBP/USD Overview – June 5: Britain Is America's Best Friend, but Still Has to Pay

The GBP/USD currency pair traded rather calmly on Wednesday, as there were few important events and reports during the day. As we expected, the business activity indices (excluding ISM)

Paolo Greco 03:52 2025-06-05 UTC+2

EUR/USD Overview – June 5: Trump Will Continue Pressuring the EU

The EUR/USD currency pair traded very calmly on Wednesday. As we mentioned yesterday, there was no reason to expect the business activity indices to influence trading — especially the European

Paolo Greco 03:52 2025-06-05 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.