I've been thinking about the trend of the US dollar recently and have noticed that many people still have some misconceptions about exchange rate movements during the interest rate cut cycle.

Let's start with the conclusion: the US dollar is unlikely to weaken unilaterally in the future; instead, it will more likely fluctuate within a high range. The rate cuts beginning in 2024 have indeed changed the game rules, but that doesn't mean the dollar will depreciate significantly.

Why do I say that? Because exchange rates are actually a comparison of "relative attractiveness." The US is cutting interest rates, Europe and Japan are also cutting rates, and some countries are doing so more aggressively. So, whether the dollar appreciates or depreciates depends not just on what the US is doing alone, but on the policy differences between the US and other economies. Recent data shows that non-farm employment remains quite strong, and inflation hasn't fallen rapidly, which shifts market expectations of the Federal Reserve from "quick easing" to "slow, late, and cautious." In other words, the US may not cut rates as sharply as previously expected.

I've noticed that the US dollar index has been oscillating between 90 and 100, which actually reflects the market's indecision—uncertain about the direction of US policy and also unsure how other central banks will move. Geopolitical uncertainties are also fueling this, as each escalation in conflict causes capital to flow back into the dollar for safety.

Historically, the strength or weakness of the dollar has never been solely about interest rate hikes or cuts. During the 2008 financial crisis, the dollar appreciated; during the 2020 pandemic, it temporarily weakened but then rebounded; during the 2022-2023 rate hike cycle, the dollar index surged to 114... each time, multiple factors are at play.

A detail worth noting: de-dollarization is indeed a long-term trend, with central banks around the world reducing holdings of US Treasuries and increasing gold reserves. But this is a process measured in years. In the short term, the dollar's central role in the global settlement system remains difficult to shake. The US's global influence, economic size, and capital market attractiveness all support the dollar's resilience.

For specific trading opportunities, in the short term, you can watch data like CPI, non-farm employment, and FOMC meetings—each release can trigger exchange rate volatility. But if you're not doing intraday trading, I suggest using support and resistance levels of the dollar index to identify swing trade opportunities, combined with policy differences among major central banks.

Additionally, pay attention to the relative performance of major currencies. The yen might strengthen as Japan ends its ultra-low interest rate policy; the Taiwan dollar is expected to appreciate during the US rate cut cycle but with limited scope; the euro remains relatively strong but Europe’s economy also faces issues. All these factors will influence the direction of the dollar index.

In summary, rather than waiting for the dollar to weaken unilaterally, it’s better to seize this high-range fluctuation environment and use gold, forex, and other assets to diversify your portfolio. Both dollar appreciation and depreciation are possible; the key is to understand the underlying logic behind these movements.