What will be the next major trend of the US dollar on the FX?Although the US dollar remains by far the weakest currency in the Forex market this year (2025), it has rebounded since early September and could confirm a medium-term bullish reversal if it breaks through major resistance. However, the signal has not yet been triggered, and the fundamentals are not yet in place. Let’s examine what the next structural trend of the US dollar could be from both a technical and a fundamental standpoint.
1) The fundamentals required to envisage a bullish reversal in the US dollar’s long-term trend (DXY)
Higher US interest rates
If the Federal Reserve were to resume its tightening cycle, or simply maintain high policy rates while other central banks ease, yield differentials would favor the dollar. International capital would then flow toward USD-denominated assets.
Resilient US economic growth
Strong GDP and labor market data would boost investor confidence in US assets. A dynamic economy naturally attracts foreign capital inflows and mechanically supports the currency.
Reacceleration of inflation
A resurgence of inflation could prompt the Fed to maintain a restrictive stance for longer. Higher nominal interest rates would then strengthen the dollar’s global appeal.
Heightened geopolitical tensions
Periods of uncertainty or international conflict generally boost demand for the US dollar, viewed as a safe-haven asset during times of stress.
Improved fiscal discipline and capital repatriation flows
Any credible initiative to reduce the US fiscal deficit would reinforce investor confidence. At the same time, the repatriation of profits by US multinationals would create additional demand for the greenback.
2) Factors likely to maintain the bearish trend
The end of the US “shutdown”
While it restores short-term confidence, the resolution of a budgetary standoff tends to revive risk appetite. Investors then turn away from safe-haven assets such as the dollar, weighing on its value.
The end of the Federal Reserve’s quantitative tightening (QT)
The Fed’s planned end of QT as of December 1, 2025 will inject liquidity into markets, which tends to weaken the dollar by increasing money supply and reducing real yields.
In summary:
A sustained rebound of the dollar would require a combination of high interest rates, solid growth, and global uncertainty. Conversely, any monetary easing or renewed global confidence could keep the US currency on a downward trajectory. From a technical standpoint, the bullish reversal signal will not be confirmed as long as the US Dollar Index (DXY) remains below the key resistance area of 101–102 points.
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