US Dollar Caught In Crossfire. Forecast as of 30.12.2025 | LiteFinance
Donald Trump wants to reshuffle the FOMC and keeps pressuring Jerome Powell to leave the Fed. At the same time, the US leader has many other issues to tackle. Let’s discuss this topic and make a trading plan for the EUR/USD pair.
The article covers the following subjects:
Major Takeaways
- The US president threatens to sue Powell for malpractice.
- The Treasury is actively seeking buyers for Treasuries.
- The shift in yield spreads is bad news for the dollar.
- Long and short positions on the EUR/USD pair can be considered at 1.18 and 1.175, respectively.
Weekly US Dollar Fundamental Forecast
The US dollar is ending the year in a state of complete calm. However, it is unlikely to stay that way in 2026. The potential repeal of US tariffs by the Supreme Court and the dismissal of FOMC member Lisa Cook are just two examples of the internal tensions that are building. They create uncertainty in the markets, the main source of which in 2025 was the US president.
Donald Trump is up to his old tricks again. He has said that Jerome Powell should resign. He would gladly fire the Fed chairman for lowering interest rates too late. The US president could still do so, but he will not. The Fed chair already has little time left, with his contract expiring in May. However, the US administration is considering filing a lawsuit for incompetence in the renovation of the Federal Reserve building.
The president’s criticism has a very specific goal. By law, Jerome Powell can remain on the FOMC after stepping down as Fed chair. Donald Trump needs to appoint more doves on the committee. The more of them there are, the higher the chances of aggressive monetary policy easing.
US Dollar Index and US Treasury Yield
Source: Trading Economics.
The US government aims to continue its financial repression, using various tools to artificially lower Treasury yields. Pressure on the Fed chair is one of them, as expectations of a renewed cycle of monetary expansion are causing debt market rates to fall. However, the list does not end there.
The Treasury needs to finance the Big and Beautiful Bill. To do this, it needs to find buyers for new bond issues. It is calling on banking regulators to make it easier for commercial banks to purchase them and is requiring stablecoin issuers to back their tokens with promissory notes. According to Scott Bessent’s estimates, the market capitalization of stablecoins could grow tenfold from the current $300 billion.
Size of Fed Holdings
Source: Reuters.
Add to this the Fed’s return to Treasury purchases, initially at a rate of $40 billion per month, and the US administration’s plans become more than clear. Artificially suppressing Treasury bond yields is unlikely to be good news for the US dollar. This is especially true in an environment where other central banks plan to hold rates steady, while Japan and Australia may even increase them.
Yields on foreign bonds will rise, while US yields will remain flat due to repression. This will result in capital outflows from the United States and a weakening of the US dollar.
Weekly EURUSD Trading Plan
The greenback may not perform well at the beginning of the year. Traders may consider selling the EUR/USD pair near 1.175 and buying it above 1.18.
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
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.
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