If you want to predict tomorrow, study yesterday. English monarch Henry VIII and Roman ruler Nero adulterated gold and silver coins with cheap alloys like copper. The outcome was always the same: a loss of trust in the monetary system. Today, the foundation of the global financial architecture is the US dollar. That is precisely why Kevin Warsh’s indecisiveness or Scott Bessent’s plans to take Treasury yields under control erode confidence in the greenback. At the same time, unprecedented economic pressure on Iran may help restore that trust — as clearly signaled by the decline in EURUSD.
The rise of the US currency is driven by several factors simultaneously. These include concerns about the global economy amid renewed talk of a large-scale trade war. There is also the realization that Washington’s sanctions machinery against Tehran relies on the still-formidable dollar infrastructure. And finally, there is the return of speculative interest in the dollar, which had recently faded: hedge funds and major asset managers have trimmed their net long positions on the USD index to four-week lows.
What could be more dangerous than a Middle Eastern conflict? Its entanglement with a global trade confrontation. Washington’s launch of an “economic outcast” operation against Iran carries serious risks. Roughly 90% of Iranian oil is purchased by China — without Beijing’s participation, full isolation of Tehran is unrealistic. If sanctions target Chinese intermediary companies, Beijing will respond in kind. Another clash between two giants bodes ill for everyone.
Notably, during the US-China trade conflict in 2018, the dollar strengthened against the yuan as both sides exchanged mirror tariffs on a “tit for tat” basis. A similar pattern is now unfolding in the dispute between Washington and Ottawa — the Canadian dollar is falling rapidly. In 2025, however, the greenback lost ground when other nations simply accepted Trump’s import tariffs without retaliating. That was when the “Sell America” wave began.
What lessons can be drawn from the past? First, one should expect a TACO-style maneuver — the US president’s signature negotiating tactic: loud threats first, then a retreat in exchange for a modest concession. Second, it is critically important to monitor how Beijing reacts to the economic siege of Iran. Third, one should never forget: any restrictions and sanctions always have workarounds.
In my view, at the initial stage the dollar is capable of gaining support through a partial restoration of trust and inflows into safe-haven assets. However, over time the “Sell America” trend will regain momentum, which will weigh on the greenback.
Against this backdrop, selling EURUSD from the 1.17 level with further short accumulation around 1.167 appears to be a sound strategy. If buyers fail to reclaim and hold above 1.167 in the near term, the probability of further decline toward 1.16 and below will increase significantly.
