empty
20.05.2025 12:40 AM
The Dollar Has Sold America Out Completely

Overall, the strength of the EUR/USD uptrend remains intact. The erosion of confidence in the U.S. dollar outweighs the divergence in monetary policy between the Fed and the ECB.

Technical Outlook: On the daily EUR/USD chart, a bullish 1-2-3 reversal pattern is in play. Long positions initiated on the breakout of the internal bar near 1.1225 should be held.The transition from being respected to facing ridicule can happen in an instant. This is evident in the shift from "Buy America" to "Sell American," a change prompted by Moody's downgrade of the U.S. credit rating. The downgrade, which was attributed to a growing budget deficit, has sparked renewed interest among investors in de-dollarization.

The blow to the greenback came from multiple directions. Moody's verdict pushed both nominal and real yields on U.S. Treasuries higher—a troubling development for an economy already showing signs of slowing down. It's also bad news for the bottom line of American corporations: costs are rising, profits are shrinking. All of this will likely result in a decline of the S&P 500. And when the index falls, the U.S. dollar—already seen by many as a risky currency—will likely follow.

U.S. Bond Yield Dynamics

This image is no longer relevant

At the same time, Moody's decision raised doubts about Congress's willingness to renew the tax-cut stimulus packages that Donald Trump is banking on.

According to Bank of America, fiscal uncertainty, a slowing economy, and unclear White House policy are now key drivers of the USD index's downward trend. Other contributing factors include portfolio diversification away from U.S. assets, a worsening capital account, and the U.S. president's intent to weaken the dollar.

In contrast, Europe appears to be gaining favor, moving from fiscal restraint toward spending. According to a Bloomberg leak, all 27 EU member states have approved a €150 billion defense fund. The spending could act as a powerful stimulus for the eurozone economy.

Even though the European Commission expects inflation in the euro area to fall to 2% in 2025 and 1.7% thereafter—due to an influx of Chinese goods, a stronger euro, and lower energy costs—this hasn't scared off EUR/USD bulls. As European Central Bank President Christine Lagarde aptly noted, while the dollar once strengthened in times of political uncertainty, it now weakens due to a collapse in trust—all the better for the euro.

Eurozone Inflation Trends and Forecasts

This image is no longer relevant

Without a doubt, Moody's downgrade soured the mood in Washington. Treasury Secretary Scott Bessent called the rating agency "perpetually late" and claimed that the current administration couldn't have done all the damage in just 100 days. He pinned the blame on the former president and his team. But the bigger question is: what will Washington do to prevent the stock market from tanking because of the downgrade?

This image is no longer relevant

Overall, the strength of the EUR/USD uptrend remains intact. The erosion of confidence in the U.S. dollar outweighs the divergence in monetary policy between the Fed and the ECB. On the daily EUR/USD chart, a bullish 1-2-3 reversal pattern is in play. Long positions initiated on the breakout of the internal bar near 1.1225 should be held.

Marek Petkovich,
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

Is the War Over or Not?

On Tuesday morning, Donald Trump announced the end of the war between Iran and Israel. Notably, he made no mention of the U.S. in this conflict or ceasefire despite having

Chin Zhao 00:42 2025-06-25 UTC+2

AUD/USD: The Aussie Is Back in the Game

The Australian dollar has returned to the 0.65 range against the U.S. dollar amid easing geopolitical tensions and renewed interest in risk assets. The declared ceasefire in the Middle East

Irina Manzenko 00:22 2025-06-25 UTC+2

The Dollar Attacks the Fed

Donald Trump has a remarkable ability to draw market attention. One moment, the U.S. President imposes massive tariffs on Independence Day; the next, he announces a 90-day delay. He reports

Marek Petkovich 00:22 2025-06-25 UTC+2

USD/CHF. Analysis and Forecast

Today, the USD/CHF pair continues to remain under pressure for the second day in a row, having dropped to the key psychological level of 0.8100 and updated its weekly

Irina Yanina 18:25 2025-06-24 UTC+2

The Whole World is a Stage, and Countries Are Its Actors... (A Limited Decline in Gold and a Rise in Bitcoin Are Possible)

Iran responded to the U.S. with a strike on an American military base in Qatar, thereby demonstrating its resolve for retaliation and confrontation. Markets reacted in a rather peculiar

Pati Gani 09:25 2025-06-24 UTC+2

The Market Has Moved On From the War

Does Iran want war? Judging by the symbolic attack on American bases in Qatar, Tehran does not appear eager to enter into an armed conflict with Washington — which

Marek Petkovich 07:19 2025-06-24 UTC+2

What to Pay Attention to on June 24? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic reports are scheduled for Tuesday, and none are of significant importance. Essentially, the only one worth mentioning is the German Business Climate Index —

Paolo Greco 07:19 2025-06-24 UTC+2

GBP/USD Overview – June 24: No Confirmation of Destruction

The GBP/USD currency pair also traded relatively calmly on Monday. While there were some price "swings," many traders and analysts had expected a much more significant move. The dollar strengthened

Paolo Greco 03:45 2025-06-24 UTC+2

EUR/USD Overview – June 24: Iran Exits Talks and Launches a Retaliatory Strike

The EUR/USD currency pair traded extremely calmly on Monday, considering the intense fundamental backdrop that developed over the weekend. Recall that over the weekend, Donald Trump once again "changed

Paolo Greco 03:45 2025-06-24 UTC+2

Trump Keeps Hitting a Wall

There's a saying: "An irresistible force meets an immovable object." It describes an irreconcilable standoff where neither side is willing to compromise. In my view, Trump's "scythe," with which

Chin Zhao 00:12 2025-06-24 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.