Recently, I’ve been looking at the trend of the US dollar and noticed some interesting things that I’d like to share with everyone.

First, let’s talk about the historical background of the US Dollar Index. From the collapse of the gold standard in the 1970s to today, the US dollar has gone through 8 complete cycles. Back then, the Nixon administration announced that the gold standard was no longer valid, and the US dollar began to float freely. Later, it hit the oil crisis and kept falling all the way to below 90. In the 1980s, Volcker’s aggressive rate hikes to 20% helped the US Dollar Index regain strength, and this cycle lasted until 1985.

After that, the story will likely be familiar to everyone— the dot-com bubble, the financial tsunami, and the COVID-19 pandemic. The US dollar experienced multiple rounds of declines. Especially during the 2022 to 2024 period, the Federal Reserve delivered aggressive rate hikes to a 25-year high. While this helped bring inflation under control, it also challenged confidence in the dollar.

Now let’s look at the key drivers for the US dollar’s movement in the second half of the year. The US Dollar Index has been falling for several consecutive days and has broken below the 200-day moving average, which is typically viewed as a bearish signal. Employment data came in below expectations, and the market began to expect the Federal Reserve to cut rates—directly weakening the dollar’s appeal.

My view is that the US dollar’s trend in the second half is likely to remain weak. If the Federal Reserve truly starts cutting rates, US Treasury yields will fall, which will further reduce the dollar’s attractiveness. There may be a rebound in the short term, but over the long term, the US Dollar Index may continue to test the support level below 102.

Next, let’s look at the major currency pairs. EUR/USD has risen to 1.0835. If it can hold around this level, it may continue to challenge 1.0900. GBP/USD is also moving higher in a range-bound manner, with the core range at 1.25–1.35. The key is how monetary policies diverge between the Bank of England and the Federal Reserve.

For USD/JPY, there is a possibility of a downward trend. This is especially relevant in the context of rising Japanese wages and the possibility that the central bank may shift toward rate hikes. In the short term, USD/CNY is moving sideways between 7.23 and 7.26, with no clear impetus to break out. As for AUD/USD, it is supported by Australia’s economic data and may continue to strengthen.

From an investment perspective, the current US dollar market is more of an opportunity for swing trades. In the short term, geopolitical conflicts or economic data that exceeds expectations could trigger rebounds. But in the medium to long term, it’s hard for the dollar to show strong performance again. For those who are more aggressive, you could consider selling the US Dollar Index (high-sell, low-buy) in the 95–100 range and use technical indicators to catch reversals. For a more conservative approach, it’s better to wait and watch—then act once the Federal Reserve’s policy outlook becomes clearer.

The core logic behind the US dollar’s trend in the second half of the year is rate-cut expectations plus economic data. As long as these two factors don’t change, it will be difficult for the dollar to “turn around.” Instead of stubbornly holding on to the dollar, it may be better to consider allocating some non-US-dollar currencies or commodity assets, since such a combination may have more opportunities.