In 2025, markets switched from "Sell America" to American exceptionalism and back again. There had to be a reason for these shifts. That reason was the escalation of the trade war between the US and China. Let's discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- The US is imposing 100% tariffs on China.
- French markets have stabilized after the political crisis.
- China is prepared for a trade war.
- Long trades on the EURUSD pair formed at 1.1545 and 1.16 can be kept open.
Weekly US Dollar Fundamental Forecast
Donald Trump is acting like a spoiled child or like an extremely immature adult. He takes offense at the fact that others are offended. On November 1, the US president imposed additional tariffs of 100% against China for tightening export controls on rare earth metals. However, prior to this, the US closed loopholes for chip supplies to Asia by tightening its export controls. At the same time, the markets are indifferent about who is right and who is wrong. The escalation of the trade conflict allowed the EURUSD pair to surge above 1.16.
Since Donald Trump's inauguration, the markets have experienced constant feverish chills. The temperature rises and then drops sharply. Investors have shifted from American exceptionalism to "Sell America" strategies, TACO, or "Trump always backs down", FOMO in the stock market with simultaneous hedging of currency risks, and finally, buying the US dollar as the safest option. Moreover, the greenback's growth alongside the S&P 500 index echoed American exceptionalism.
Everything in nature is cyclical, so the return of the "Sell America" strategy seems inevitable. Stock indices fell, and the EUR/USD pair soared. At first glance, this seems logical given the stabilization of the situation in France. Sébastien Lecornu became prime minister again, and the yield spread between French and German bonds returned to levels seen before the resignation.
France-Germany 10-Year Bond Yield Spread
Source: Bloomberg.
The fundamental problem remains: budget difficulties and the intention of both the left and the right to remove the new prime minister. The drama surrounding Lecornu's resignation and subsequent return is unlikely to change anything fundamentally. Meanwhile, another issue is the trade war.
According to US administration officials, the US has the upper hand, and China should step back. However, China does not want to, warning of retaliation and presenting a new weapon: batteries. American companies need energy storage to support their data centers. Beijing can cut off supplies, as it did with rare earth minerals.
At the same time, China is redirecting its supply chains. In September, its exports grew by 8.3%, which is faster than the 6.6% forecast by Bloomberg experts. Shipments to the EU grew by 14%, to Africa by 56%, and to Southeast Asia by 16%.
Chinese Exports and Imports
Source: Bloomberg.
While the US administration was swinging the sword of tariffs, China prepared for the trade war. This time, the conflict may be prolonged. Investors should focus on cyclicality: wait until the "Sell America" trade shifts to TACO.
Weekly EURUSD Trading Plan
Long trades on the EURUSD pair formed at 1.1545 and built up at 1.16 should be maintained as long as the euro trades above 1.1585.
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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