Investors Are Betting Against the Dollar

The U.S. Dollar Index (DXY) is up 0.20% to 104.24 points this week, while the EURUSD has declined by 0.22% to 1.07990. The Dollar's upside correction paused after the EURUSD plunged to 1.07320 last Wednesday, breaking below key support at 1.07800–1.08000. The pair has since rebounded, stabilising just above support, but a clear path toward 1.06800–1.07000 is now open. Any strong catalyst could drive the pair toward these downside targets.

This week presents multiple downside risks for the EURUSD, including the release of U.S. Manufacturing and Services PMIs. Additionally, the U.S. will impose reciprocal tariffs on all nations with tariffs on American goods starting April 2, as confirmed by President Donald Trump. March Nonfarm Payrolls, set for release on Friday, are unlikely to provide a strong push for the Dollar.

While macroeconomic data appears supportive for the Greenback, the new tariff measures could create market turmoil, potentially weighing on the Dollar. Trump has reinforced his stance, dismissing concerns over rising car prices due to the recent 25% tariffs on car and parts imports, stating he "couldn’t care less." On the other hand, investor uncertainty could fuel demand for the Dollar as a safe-haven asset. The reaction to the U.S. labour market report in the context of an escalating trade war remains difficult to predict.

Large investors continue betting against the Dollar, as the WisdomTree Bloomberg US Dollar Bullish Fund (USDU) recorded substantial net outflows of $64.59 million last week and another $2.7 million this week. If the market moves against them, losses could be significant.

From a technical perspective, the EURUSD remains in extreme overbought territory, requiring a decline toward 1.06000 to relieve pressure. The path toward this level is becoming increasingly viable.