US Dollar Posts Gains As Markets Turn to TACO Trading. Forecast as of 14.10.2025 | LiteFinance
Trump’s strategy is to deliver threats and then retreat. However, he has recently announced tariffs and then written that everything would be fine with China. Let’s discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- Tariffs against China will not necessarily be imposed.
- TACO trading is regaining its popularity.
- The French Parliament threatens the Prime Minister with a vote of no confidence.
- The 1.1585 level is the line in the sand for the EURUSD pair.
Weekly US Dollar Fundamental Forecast
The Sell America strategy is no longer relevant, so markets have turned to TACO trading. The rapid pace of market events can be dizzying. While it previously took weeks to shift to the “Trump Always Chickens Out” strategy, now a single trading day is enough. On Friday, after the close of trading, the US president wrote about the introduction of 100% tariffs, and on Sunday, he noted that everything would be fine with China. On Monday, Scott Bessent stated that the implementation of tariffs was not guaranteed.
US stock indices began the week on a positive note, indicating that April’s market performance would not be replicated. The USD index experienced a 4% decline on the day of the introduction of tariffs. This pattern, coupled with the resurgence of Sell America, led to a notable rise in the EUR/USD pair, surpassing 1.16. However, the euro’s surge appeared to be short-lived.
Mizuho Bank has observed a significant number of bullish bets on the US dollar during this period. It was anticipated that trade wars would fortify the greenback due to accelerating inflation and the Fed maintaining elevated interest rates. In fact, the US central bank is prepared to disregard the acceleration of consumer prices. The primary concern is the cooling of the labor market. However, EURUSD bears are benefiting even from monetary expansion.
Probability of Recession in US Economy
Source: Wall Street Journal.
According to the Wall Street Journal, the probability of a recession in the US within the next 12 months is 33%. The forecast indicates a projected GDP growth of 1.7%. According to a survey conducted by Bloomberg, experts have estimated the figure to be even higher, at 1.8%. They predict a single act of monetary expansion in 2025, contrasting with the derivatives market’s expectations of two rate cuts. According to Standard Chartered, the EURUSD pair is expected to decline to 1.13 as the derivatives market starts to adjust expectations for the scale of monetary policy easing.
The US dollar is disregarding the dovish rhetoric of FOMC officials. According to Christopher Waller, the US labor market is weak. This information is sufficient to determine whether further rate cuts are necessary. Philadelphia Fed President Anna Paulson believes that as long as inflation expectations are anchored, price increases due to supply effects will not turn into an inflation problem. She anticipates two rate cuts before the end of the year.
Forecasts of France’s Budget Deficit
Source: Bloomberg.
However, the euro continues to face challenges. France’s newly appointed Prime Minister Sébastien Lecornu will address the National Assembly for the first time. Parliament has already dismissed two of his predecessors and is threatening to do the same to the new head of government. The likelihood of snap elections is increasing, which is exerting pressure on the euro.
Weekly EURUSD Trading Plan
As for the trading plan for the EURUSD pair, the 1.1585 level is the line in the sand. If bulls manage to keep the price above this level, long trades formed at 1.1545 can be increased. If they fail to do so, short trades can be considered.
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
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