The US dollar’s previous uptrend appears to have ended, as indicated by a break in its steep uptrend line. Caution is advised, as this may not necessarily lead to a downtrend.
While there is speculation that the dollar will fluctuate before determining its next direction, current indicators suggest it is losing strength. Historical data shows that during the first year of Trump’s presidency, the US dollar experienced a downtrend, raising questions about future performance.
This shift in strength from the world’s most traded currency presents a range of possibilities across financial markets. With the break in the uptrend, traders should be prepared for increased volatility, as uncertainty creates an environment where sharp moves are more likely. While short-term fluctuations are unavoidable, the broader concern lies in whether a sustained shift in momentum is beginning to take hold.
Looking back at past trends, there is a clear precedent for weakness under a new presidential term. In Trump’s first year, the dollar moved lower despite initial expectations that pro-growth policies would support it. This time, factors at play are different, but the parallels cannot be ignored. Inflation remains a key concern, and the Federal Reserve’s approach to interest rates will dictate movements. With rate increases already slowing, the advantage that once supported the currency’s climb may be fading. The question is whether sellers will capitalise on this shift or if markets have already adjusted expectations accordingly.
Beyond the direct impact on currency pairs, weaker performance in the US dollar affects multiple asset classes. Commodities tend to benefit when the greenback declines, as prices adjust to reflect a change in purchasing power. Equities, particularly those with international exposure, often react in complex ways, depending on how earnings expectations shift. Fixed-income markets factor in numerous variables, but shifts in dollar strength play a visible role—especially with implications for emerging markets, where borrowing costs move with expectations of US monetary policy.
The weeks ahead will test market assumptions. A temporary pause does not necessarily guarantee a full reversal, but traders should be wary of assuming prior trends will resume without resistance. Price action will reveal whether the current weakness is simply a correction or if a longer-lasting change is unfolding. With technical indicators confirming the break in momentum, the focus now turns to whether fundamental shifts reinforce what charts are beginning to suggest.
