Dollar Loses Connections

It couldn't get worse. In the view of the White House and its team, globalization is a bad policy that has left America behind. Whatever reconstruction of the international trade system Donald Trump initiated has only worsened the situation. The US president demands payment for access to the large and beautiful store known as the United States. Instead, other countries are seeking out other stores.

The conclusion of a historic agreement between the European Union and India is a result of Donald Trump's anti-globalism. Prior to this, the two sides had struggled for years to agree on free trade. However, Brussels needs to reduce its dependence on the US and China, while New Delhi aims to find markets with lower tariffs. Washington charges the third-largest economy in Asia 50% on purchases of Russian oil. Yet, no one should dictate terms to a country like India.

Beijing has already successfully dealt with tariff issues. The redirection of supplies led to a record trade surplus in 2025. Now, the same must be done by Europe and other regions. If successful, the large and beautiful US store will be left without suppliers. There will be no one to provide dollars, and therefore no one will buy American assets. Fears surrounding this issue have led to the largest three-day decline in the USD index since the introduction of tariffs in April.

The situation in the futures market for the greenback is becoming dire. The premiums on short-term contracts that benefit from further declines in the US dollar have reached their highest level since records began in 2011. The risks of a turnaround on long-term derivatives have fallen to their lowest point since May 2025. Investors are wary of both the sell-off of American securities by non-residents and coordinated currency interventions reminiscent of the Plaza Accord in 1985.

The basis of these fears lies in the uncertainty of White House policy. According to Bloomberg's research, Donald Trump does not retreat easily. Of the 49 tariff threats since November 2024, only 43% have been retracted. TACO operates with caveats. Overall, the negotiating strategy of the White House leads to increased volatility in the US dollar and enhances investors' desire to get rid of it.

In this situation, even weak currencies give the greenback a run for its money. The latest macro statistics from the Eurozone indicate a resilient but not particularly strong economy. ECB officials increasingly discuss open options in the monetary expansion cycle. The euro's strength is not as strong as anticipated at the end of 2025. However, this is not necessary for the rally in the main currency pair to continue.

Technically, the daily chart for EUR/USD shows a continued northern trend. Long positions formed in the rebound from 1.1835 against the US dollar make sense to hold. Target levels are 1.1970 and 1.2050.