Both December's US labor market statistics and the Supreme Court's verdict on the legality of the US tariffs will determine the EUR/USD pair's trajectory. Their return could boost the US economy. Let's discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The US dollar is rising on expectations.
- Revenues from US tariffs may have to be refunded.
- The labor market is not as weak as it seems.
- A return of EUR/USD quotes above 1.17 is a sign of a reversal.
Daily US Dollar Fundamental Forecast
It is too early to give up on the US dollar. The US currency started 2026 on a positive note, despite numerous bearish forecasts at the end of 2025. However, geopolitical turmoil, the strength of the US economy, and even the expected removal of tariffs allowed bears to dominate the EUR/USD market.
At first glance, the Supreme Court's ruling that the US universal tariffs are illegal is a blow to the US dollar. The US government will have to return the money, with thousands of companies lining up to get it back. As a result, the budget deficit and public debt will increase, while the twin deficits of the budget and trade balance have always been considered the curse of the greenback.
US Trade Balance
Source: Bloomberg.
In fact, thanks to import duties, the US foreign trade gap has narrowed to its lowest level since 2009, and the US government has at least five options to replace tariffs. Indeed, an alternative plan will not be easy to implement and will take time, but who has any doubts about Donald Trump?
In the short term, the US dollar may gain ground due to the Supreme Court's ruling that import duties are illegal. This move by the judges can be seen as a fiscal stimulus. According to Wells Fargo, US corporate profits will grow by an additional 2.4% in 2026 thanks to refunds. Expectations of a growing budget deficit will force investors to sell Treasuries. Higher yields will increase the attractiveness of US assets, leading to capital inflows into the US and a stronger dollar.
Fiscal stimulus could boost the tailwinds for the US economy. It is growing thanks to AI-driven productivity gains. In the third quarter, the indicator accelerated to its highest level in two years.
US Nonfarm Labor Productivity
Source: Bloomberg.
The fiscal stimulus in the form of refunds of previously paid duties will suit the hawkish members of the FOMC. The Fed is likely to continue its pause in the monetary expansion cycle, which will support EUR/USD bears.
Thus, the removal of tariffs will take money away from the US, but will benefit its economy and the dollar. In this regard, a decline in EUR/USD quotes ahead of major events, including the Supreme Court's verdict and the release of US December employment data, seems natural. Markets are growing on expectations, and bullish factors are reflected in the greenback's rate.
On the other hand, real non-farm payrolls figures close to forecasts may trigger the second part of the “buy the rumor, sell the fact” process for the US dollar. Profit-taking on short positions in the main currency pair will allow it to test the bottom.
Daily EURUSD Trading Plan
If the EUR/USD pair settles above 1.17, a reversal may occur, allowing traders to open long positions. Otherwise, it is better to stick to the previous strategy of 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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