The dollar index measures the U.S. currency against the other leading world reserve foreign exchange instruments. After reaching the highest level since November 2022 in January 2025, the index has moved lower. While the long-term trend since 2008 remains higher, the short-term path of least resistance is bearish in March 2025.
In a February 6 Barchart article on the dollar index, I concluded:
The trend is always your best friend, which remains higher in the U.S. dollar index in February 2025. Currency markets reflect the global economic and political landscapes, which could be highly volatile and uncertain in 2025, given the change in the U.S. administration.
The index was at the 107.42 level on February 5, 2025, and was substantially lower in early March 2025.
The daily trend in the dollar index is bearish
After reaching a 110.17 high on January 13, 2025, the dollar index turned lower and fell below the 104 level in early March.
The daily chart shows that the U.S. dollar index declined 6.06%, falling to a 103.490 low on March 7, 2025.
The longer-term trend since 2008 is bullish
While the short-term path of least resistance has turned lower, the dollar index’s bullish trend since the 2008 low remains firmly intact.
The twenty-year monthly chart illustrates the dollar index’s rise from the 2008 70.69 low. The index has made higher lows and higher highs over the past seventeen years, with the latest high in 2022 at 114.78, which is the technical resistance. Technical support on the monthly chart is at the September 2024 100.16 low.
The trend from the 1980s indicates lower highs
To complicate matters from a technical perspective, the dollar index’s short-term trend is bearish, its long-term trend since 2008 is bullish, and its trend from the 1980s remains bearish.
The quarterly chart shows a pattern of lower highs since the 1985 164.72 peak. The index made lower highs in 2001 and 2022, but it has made lower highs for more than four decades, a bearish trading pattern.
Geopolitics and economics are changing, questioning the U.S. dollar’s dominance
Currency markets reflect the economic and geopolitical landscapes. While interest rate differentials are critical for the dollar index, the United States’ position and influence are crucial factors for the dollar’s role as the global reserve currency.
Over the years, Europe’s economic consolidation has increased its impact on the dollar as the euro is the primary currency in the dollar index. Meanwhile, the “no-limits” alliance between China and Russia and the potential for a BRICS economic bloc pose a threat to the dollar’s dominance. China is the world’s second-leading economy. More recently, tariffs under the Trump administration increased trade barriers that could weigh on the dollar’s value versus other global currencies.
The geopolitical landscape remains highly turbulent, with ongoing wars in Ukraine and the Middle East. The bottom line is that since the highs in the 1980s, the dollar index has experienced long-term devaluation versus other reserve currencies.
Gold is telling currency markets all fiats, including the dollar, are losing value
Fiat currencies depend on the full faith and credit of the governments issuing the legal tender. Gold is the world’s oldest means of exchange, and central banks and governments validate gold’s global financial role as they hold the precious metal as a reserve asset, classifying gold as a currency. Over the past years, countries have increased their holdings as net gold buyers. Since 1999, gold’s bull market signifies that the dollar and all fiat currencies have been losing value.
The quarterly COMEX gold chart shows the over tenfold rally from $252.80 in 1999 to nearly $3,000 per ounce in 2025. Gold’s ascent is a commentary on fiat currency values.
The dollar index is a barometer of the U.S. currency versus the other leading reserve foreign exchange instruments, with a significant weighting to the euro. While interest rate differentials will continue to impact short-term trends, the dollar’s decades-long decline remains a substantial trend that defines the U.S.’s declining economic dominance.
While the dollar index may not plunge, gold’s ascent tells us that all fiat currencies have suffered significant devaluation that continues in 2025.
