Recently, people have been asking me whether the US dollar exchange rate will keep falling. This question is absolutely on point. Judging from the trend over the past year, the US Dollar Index has faced noticeable downward pressure, and this trend may continue in 2026.

First, let me walk everyone through the dollar’s historical cycles. Since the collapse of the Bretton Woods system in 1971, the US Dollar Index has gone through eight distinct phases. In the 1970s, the Nixon administration abandoned the gold standard, sending the dollar into an oversupply period; later, it was hit by the oil crisis, and the index slid all the way below 90. In the 1980s, then-Fed Chair Volcker implemented strong governance against inflation, pushing the federal funds rate up to 20%—only then did the dollar start to rebound, rising until it reached a peak in 1985.

The story afterward becomes even more interesting. The 1990s internet bubble, the financial tsunami of the 2000s, the unlimited QE during the COVID-19 pandemic in 2020, and then the aggressive rate hikes after 2022— the US Dollar Index has been like a roller coaster, repeatedly switching between strength and weakness. So where are we now? From a technical perspective, the US Dollar Index has been falling consecutively and has broken below the 200-day moving average, which is usually considered a bearish signal.

So why would the US dollar exchange rate continue to fall? The key lies in the policy shift by the Federal Reserve. Last year, employment data came in below expectations, and the market began pricing in more rate-cut expectations, which directly weakens the dollar’s appeal. As US Treasury yields fell, funds started looking for other investment opportunities, putting pressure on the dollar. From a macro perspective, if the Federal Reserve continues to implement easing policies while economic data remains persistently weak, the US Dollar Index is very likely to fall further in 2026, and the support level could be below 102.

But this is not a straightforward one-way drop. We need to look at specific currency pairs. For EUR/USD, benefiting from the dollar’s depreciation and improvements in the ECB’s policy, EUR/USD is expected to continue rising, with the key resistance at 1.09. GBP/USD is similar: because the Bank of England cuts rates more slowly than the Federal Reserve, this provides support for the pound. It is expected that GBP/USD will trade with an upward bias and range between 1.25 and 1.35.

As for the US dollar against the Chinese yuan (USD/CNY), this is more complicated. It depends on both Federal Reserve policy and the stance of the People’s Bank of China. At present, the US dollar has been moving sideways in the 7.23–7.26 range, and in the short term it lacks momentum for a breakout. For USD/JPY, as Japan’s economy recovers and rate-hike expectations grow, the dollar faces downward pressure; technically, if it breaks below 146.90, it could continue to probe lower.

When it comes to trading opportunities, my suggestion is to view them in phases. In the short term (the first half of 2026), the US dollar exchange rate will likely remain in a structural consolidation/oscillation. This is actually a good opportunity for swing trading. Geopolitical events and conflicts could cause the dollar to spike quickly, but rate-cut expectations for the Federal Reserve would weigh on it. Aggressive investors could look at selling/placing take-profit on the US Dollar Index in the 95–100 range and buying the dips for rebound plays, using technical indicators. If you’re more conservative, it’s better to keep watching and only act once the Federal Reserve’s policy path becomes clearer.

From a medium- to long-term perspective, after the second half of 2026, the dollar may gradually weaken. The strategy then should be to gradually reduce long exposure to the US dollar and shift allocations to non-US currencies or commodity assets. If the de-dollarization trend accelerates globally, the dollar’s position as a reserve currency will be marginally weakened, creating long-term downward pressure on the US dollar exchange rate.

In summary, the trajectory of the US dollar exchange rate in 2026 depends on Federal Reserve policy, economic data, and geopolitical events. Will the US dollar keep falling? Based on the current situation, the long-term trend is indeed downward, but short-term fluctuations will be very frequent. The key is to stay flexible—adjust strategies in a timely way based on data and events—so you can capture trading opportunities amid US dollar volatility.