USD Forecast 06 August 2026: Growing skepticism toward the Fed’s policy is reviving the “Sell America” trade, which first gained momentum after Donald Trump introduced the highest tariffs since the 1930s. Comments from Kevin Warsh and Scott Bessent have reinforced this sentiment. Let’s analyze the situation and develop a trading plan for the EUR/USD pair.
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Daily Fundamental Forecast for Dollar
What could be worse for the US dollar than the reopening of the Strait of Hormuz? Iran and Oman are reportedly close to reaching a deal that could boost oil supplies, lower crude prices, and reduce demand for the greenback as a safe-haven asset. The odds for Fed tightening will also decline. However, that is only part of the story. Investors are increasingly reviving the “Sell America” trade that gained momentum after the tariff shock of April 2025.
Dollar bulls are growing uneasy over the currency’s inability to strengthen despite elevated Treasury yields and increasingly hawkish rhetoric from Fed officials. Neel Kashkari is calling for higher interest rates immediately, while Lisa Cook and Mary Daly have signaled they would support further tightening if inflation accelerates. Yet investors continue to sell both the US dollar and Treasuries, with comments from Kevin Warsh and Scott Bessent reinforcing this bearish sentiment.
US Dollarand Treasury Yield
The new Fed Chair initially adopted a hawkish tone, but investors soon concluded that he had little intention of raising interest rates. Instead, the official noted that the markets should do the Fed’s job. Reports of Kevin Warsh’s regular conversations with Donald Trump further undermined confidence in the Fed’s independence. Investors fear the FOMC could become more responsive to the US administration’s preferences—a development that would be unfavorable for EUR/USD bears.
The US Treasury also attempted to downplay its role in the coordinated currency intervention with Japan. Officials argued that the sale of euros simply reflected the administration’s commitment to a strong-dollar policy. However, a closer look at the mechanics of the intervention has raised more questions than answers.
Read More: Dollar Hits 2-Month High as Fed Rate Hike Bets Push US Currency Up
Rather than selling its Treasury holdings, Japan is reportedly using them as collateral to obtain US dollars, which are then sold as part of the intervention. The operation relies on the FIMA facility—a more expensive alternative to traditional repo transactions—with a daily limit of $60 billion. Scott Bessent has urged the Fed to raise that limit. In effect, the arrangement increases the supply of US dollars, allowing Japan to support the yen.
Such operations expand the Fed’s balance sheet and resemble quantitative easing, a policy that is generally considered bearish for the US dollar. The contradiction is hard to ignore: while the Fed maintains a restrictive policy stance, its balance sheet is effectively expanding. Likewise, Kevin Warsh has advocated reducing the balance sheet while overseeing measures that increase it. These inconsistencies are reinforcing investor skepticism and fueling the renewed “Sell America” trade.
Daily Trading Plan for EUR/USD
With geopolitical risks easing and investor confidence in the Fed weakening, the EUR/USD pair may climb toward 1.1800. However, it would be better to wait for the US labor market data before taking a directional position. Until then, it makes sense to stay on the sidelines or focus on trading within the 1.1500–1.1565 range and on moves back into that range.
Disclaimer
This article is intended for educational purposes only. The views and opinions expressed are those of individual analysts or brokerage firms and do not represent the views of GoldSilverReports.com. Investors are strongly advised to consult certified SEBI-registered financial experts before making any investment or trading decisions.
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