Recently, many people have been asking whether the US dollar exchange rate will continue to fall, so I’ve organized my observations and analysis.

First, the conclusion: the trend of the US dollar is far more complex than you might imagine. Historically, the dollar has experienced eight complete cycle fluctuations, each corresponding to different economic backgrounds. The current round is actually quite intriguing.

A review of the dollar’s historical trajectory reveals some insights. After the collapse of the Bretton Woods system in the 1970s, the dollar was liberated from the gold standard constraints, but this led to excess. Later, Volcker aggressively raised interest rates to 20%, hardening inflation, and the dollar index soared accordingly. But such high-interest-rate environments couldn’t last long; in the 1990s, with the internet boom and strong US economic growth, the dollar experienced another bull market. Then came the 2008 financial crisis and quantitative easing, which drove the dollar to its lows. After the COVID-19 pandemic in 2020, the Federal Reserve started printing money aggressively again, causing the dollar index to decline sharply, followed by severe inflation pressures.

Now, this stage is quite interesting. From early 2022 to now, the Fed has aggressively raised interest rates to a 25-year high and started shrinking its balance sheet. On the surface, this looks very hawkish, but it also challenges confidence in the dollar. Recent data shows the dollar index has been falling consecutively, breaking below the 200-day moving average, which is usually seen as a bearish signal. US employment data has been below expectations, leading markets to anticipate more frequent rate cuts by the Fed, which directly weakens the dollar’s appeal.

Will the dollar exchange rate continue to fall? My view is that there may be a short-term rebound, but the overall trend is indeed weakening. If the Fed really begins a rate-cutting cycle and economic data remains soft, the dollar index could continue to decline within the year, with support possibly below 102. But a key variable here is the policy stance of the European Central Bank. EUR/USD and the dollar index are almost inversely related; if the dollar depreciates and the European economy continues to improve, the euro will strengthen, further pressuring the dollar.

Looking at other currency pairs, GBP/USD faces a similar logic. The strength of the pound depends on whether the Bank of England’s rate cuts are truly slower than the Fed’s. From a technical perspective, GBP/USD might stay in a range of oscillation, with core volatility between 1.25 and 1.35.

The USD/CNY pair is more special because it involves China’s exchange rate policy. If the Fed continues to cut rates and China’s economy slows, the yuan could face pressure, and the dollar might rise. But the central bank’s intervention strength is also crucial. Currently, USD/CNY is trading sideways between 7.23 and 7.26, lacking momentum for a breakout.

USD/JPY is even more interesting. Japan recently saw wage growth at a 32-year high, which suggests the Bank of Japan might adjust its interest rate policy. If Japan raises rates, the yen will appreciate, and USD/JPY will decline. Technically, if USD/JPY breaks below 146.90, further downward testing could occur.

The Australian dollar has been relatively strong. Australia’s economic data exceeded expectations, and the trade surplus remains healthy. The Reserve Bank of Australia remains cautious, hinting at a low likelihood of rate cuts. These factors support the AUD’s strength, which is unfavorable for the dollar.

To sum up, whether the dollar exchange rate will continue to fall depends on several key factors: first, the pace of Fed rate cuts; second, US economic data performance; third, the policy choices of other major central banks. In the short term, the dollar may rebound amid geopolitical risks or if economic data exceeds expectations, but in the medium to long term, if a rate-cutting cycle truly unfolds, the dollar’s weakness could persist.

This stage is more about flexibility. Aggressive investors can buy low and sell high between support and resistance levels of the dollar index, capturing swing opportunities. Conservative investors might wait until the Fed’s policy path becomes clearer before acting. In my opinion, trading the dollar now heavily tests one’s sensitivity to data and events—those who can interpret the underlying implications of economic data faster will gain an edge in this wave of exchange rate volatility.