The US dollar's impressive performance in 2026 was overshadowed by Donald Trump's hard-line stance on taking over Greenland. He is even prepared to start a trade war to make this happen. How will this affect the EUR/USD pair? Let's discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The US is imposing new tariffs on Europe.
- Trump insists his country needs to acquire Greenland.
- The US dollar may suffer from the conflict.
- Long positions on the EUR/USD pair can be considered above 1.1615.
Weekly US Dollar Fundamental Forecast
Sell America, de-dollarization, and loss of confidence: fears about the revival or acceleration of those trends have created an insurmountable barrier for EUR/USD bears after Donald Trump said he would slap an extra 10% tariffs on a bunch of European countries. These rates could go up to 25% in June if an agreement to buy Greenland is not reached.
Investors have already heard a similar story. In 2025, on America's Liberation Day, large tariffs were imposed, triggering the "Sell America" narrative. The US used threats to achieve significantly lower, but still substantial, 15% import duties. This is how TACO, or Trump Always Chickens Out, trading emerged. It allowed stock indices to stage an impressive rally and the US dollar to recover its position in the second half of the year.
US Trading Partners
Source: Bloomberg.
However, if foreign trade was at stake in 2025, Greenland became the focus in 2026. Scott Bessent calls Europe weak in ensuring its security and challenges Brussels to a full-scale trade war, in which all means are acceptable, from suspending the previously reached agreement on 15% tariffs to the EU imposing duties on American imports and activating the so-called anti-coercion mechanism.
It is also known as the bazooka. It includes export controls, tariffs on services, restrictions on intellectual property rights, barriers to American companies seeking to participate in public contracts, and much more.
The US and Europe are once again on the brink of a large-scale trade war, and last year's experience is prompting investors to buy the EUR/USD pair rather than sell it. At least until the TACO trade comes into effect. However, before the escalation of the conflict over Greenland, hedge funds became net sellers of the euro for the first time since early November.
EUR/USD Performance and Speculative Positions on Euro
Source: Bloomberg.
Indeed, Europe appears more vulnerable. However, it can reroute supply chains, as China did. In 2025, despite tariffs, China's foreign trade surplus reached a record high of $1.19 trillion. Its economy expanded by 5%, in line with government projections.
The US is a different story. Tariffs will be absorbed by American companies and households, slowing economic growth, raising the risk of an early resumption of the Fed's monetary expansion cycle, and weakening the dollar. Meanwhile, everything was looking so good for the dollar in 2026.
Weekly EURUSD Trading Plan
Issues surrounding Greenland and an impending trade war between the US and the EU are shaking up the Forex market. A rally in the EUR/USD pair is looking more likely. If the euro settles above 1.1615, investors might resume buying the pair. Otherwise, it would be better to continue selling the euro.
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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