I’ve been thinking about the US dollar forecast topic lately, because the trend of the US dollar in 2025 is definitely worth in-depth analysis. I noticed that the US Dollar Index experienced a clear period of decline, when it broke below the 200-day moving average—this is usually regarded as a bearish signal.

The core logic behind the US dollar exchange rate is actually quite simple: it is an exchange ratio of a given currency relative to the US dollar. For example, if EUR/USD rises from 1.04 to 1.09, it indicates that the euro is appreciating and the US dollar is depreciating. The US Dollar Index is an index made up of exchange rates of six major currencies against the US dollar: the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc.

I think many people overlook one key point: the historical cyclical fluctuations of the US dollar. Since the collapse of the 1971 Bretton Woods system, the US Dollar Index has gone through eight distinct phases. From the failure of the gold standard in the Nixon era, to Paul Volcker using high interest rates to manage inflation in the 1980s, and then to the economic growth led by Clinton in the internet age—each phase reflects different economic conditions. In particular, after the 2008 financial crisis, the US dollar once fell to around the 60 level, and later gradually recovered.

When it comes to the US dollar forecast, I believe the key is still to look at the policy direction of the Federal Reserve. If the Fed continues to cut interest rates, US bond yields will fall, which would weaken the US dollar’s appeal. In early 2025, US employment data came in below expectations, which strengthened market expectations for multiple rate cuts.

Looking at how different currencies moved versus the US dollar, EUR/USD at the time rose to 1.0835, showing continued upward momentum. If the European Central Bank improves its policies, economic expectations rise, and the Fed’s rate cuts are implemented, the euro could keep strengthening. The logic for GBP/USD is similar: it is expected to trade higher within a range of 1.25 to 1.35.

For USD/CNY, it is influenced by the combined effects of US and Chinese economic policies. If the Fed raises interest rates while China’s economy slows down, the yuan may face downward pressure. As for USD/JPY, it may trend lower due to rising Japanese wages and potential inflation pressure—meaning the Bank of Japan may adjust rates, and USD/JPY is expected to show a downward trend. For the Australian dollar, the data performed well; the Reserve Bank of Australia remains cautious, implying a smaller likelihood of rate cuts, which provides support for the Australian dollar.

Is it a good time to buy US dollars? My view is that you need to consider it in stages. In the short term, there are opportunities for structural volatility—geopolitical conflicts or US economic data coming in better than expected could push the US dollar higher. But in the medium to long term, as the Fed’s rate-cut cycle deepens, the US dollar may weaken moderately, and capital flows could shift toward high-growth emerging markets or the Eurozone.

I suggest that aggressive investors could conduct swing trades in the US Dollar Index within the 95 to 100 range, using technical indicators to capture reversal signals. Conservative investors should mainly wait and see, until the Fed’s policy path becomes clearer. Looking at the medium to long term, gradually reducing US dollar long positions and allocating to non-US dollar currencies with reasonable valuations or commodities may be more attractive. The US dollar forecast for 2026 will rely even more on data-driven factors and event sensitivity; staying flexible and disciplined is what allows you to seize opportunities amid exchange rate fluctuations.