Recently, I noticed an interesting phenomenon: many people are asking when the US dollar will fall, but in reality, the dollar's trend is much more complex than imagined.

First, the conclusion: the US dollar is more likely to fluctuate at high levels rather than decline sharply in the near future. Why? Because the Federal Reserve's current stance is mainly data-driven, not aiming to initiate a new cycle of rate hikes. As long as employment, wages, and core inflation begin to slow down, there is still a chance for policy to shift toward easing. But the current problem is that non-farm payroll data remains strong, and inflation stubbornly persists, so market expectations for rate cuts keep getting pushed back.

This is also why some institutions believe that interest rates may remain unchanged throughout 2026, with a policy shift possibly not happening until 2027. If rate hikes do occur, they are more likely to be small adjustments to address sticky inflation, rather than the rapid increases seen in 2022-2023.

From an interest rate perspective, the core logic behind the dollar's strength or weakness is the interest rate differential. When rates are high, capital flows into the dollar; when rates are low, capital moves to other markets. But there's an easily overlooked point: markets are efficient and won't wait until actual rate hikes or cuts happen to react; instead, they anticipate changes based on expectations. Therefore, focus should be on the Fed's dot plot and market expectations, rather than just current policy.

The dollar also faces another long-term pressure: the trend of de-dollarization. This isn't sudden but has been gradually intensifying over the past few years. The eurozone, the rise of the Chinese yuan in oil futures, cryptocurrencies, and since 2022, central banks reducing holdings of US Treasuries and increasing gold reserves—all challenge the dollar's absolute dominance. But note that this process is measured in years, and it’s unlikely that the dollar index will drop from 100 to 90 within the next 12 months. The dollar's central role in global reserves and settlement systems remains difficult to replace in the short term.

So, when will the dollar fall? Instead of waiting for a unilateral decline, it’s better to understand the real logic behind the dollar's movement. The exchange rate depends not only on the US itself but also on the relative performance of its constituent currencies. If Europe cuts rates more slowly or Japan’s policies remain more accommodative, the dollar could stay resilient due to the relative interest rate differential. Additionally, as long as global financial risks, geopolitical conflicts, or market panic occur, capital may flow back into the dollar because it remains the most important safe-haven currency.

If you want to find trading opportunities from dollar fluctuations, in the short term, focus on data that influence rate expectations, such as CPI, non-farm payrolls, and FOMC meetings. In the medium term, use support and resistance levels of the dollar index combined with policy differences among major central banks to identify swing trade opportunities. In the long term, rather than betting on a unilateral decline of the dollar, it’s better to diversify dollar risk with gold, forex, and other assets—especially when the dollar is at high levels, fluctuating or weakening.

In simple terms, the future of the dollar isn’t just about rising or falling; it’s a complex pattern of fluctuations driven by the interaction of global policies, economic data, geopolitical factors, and capital flows. Understanding these relationships is key to grasping the dollar's trend.