• AUD/USD
    SELL
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    BUY
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    CHG
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  • EUR/GBP
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    CHG
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  • EUR/JPY
    SELL
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    CHG
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  • EUR/USD
    SELL
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    BUY
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    CHG
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  • GBP/USD
    SELL
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    BUY
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    CHG
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  • USD/CAD
    SELL
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    BUY
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    CHG
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  • USD/CHF
    SELL
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    BUY
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    CHG
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  • USD/JPY
    SELL
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    CHG
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Is this the start of an inevitable US dollar crash?

The USD has hit its lowest prices of 2024, with GBP/USD and EUR/USD near their highest levels since July 2023. Significant movements in USD/JPY and potential US interest rate cuts impact trading strategies and risks.

US dollar bill in the dirt
Source: iStock
Picture of Frank Kaberna
Frank Kaberna
Director of Strategy, Chicago

Key points

  • USD is at its lowest prices of 2024, with GBP/USD and EUR/USD near highs since July 2023
  • USD/JPY dropped from above 160.00 to below 146.00 between July and August 2024
  • Potential US interest rate cuts could negatively impact the value of the USD
  • GBP/USD is trading above 1.3000, a level not consistently seen since 2022
  • US unemployment has reached its highest level since 2021, affecting USD prices

USD HITS LOWEST PRICES OF 2024

GBP/USD and EUR/USD are trading near their highest levels since July 2023 as US economic data underperforms. The dollar's decline against these major currencies underscores the impact of recent economic indicators and expectations of heavy rate cuts coming from the US. It's yet to be determined whether this decline is simply a mean reversion or an impending crash for the US dollar.

DOLLAR FELL -10% FROM HIGHS

The US dollar has experienced a significant decline in recent weeks, falling 10% from its highs against the Japanese yen. USD/JPY traded from above 160.00 to under 146.00 from July to August 2024. This sharp drop highlights the volatility and rapid changes in currency markets driven by differing economic conditions and expectations. This move is particularly noteworthy given the dollar's previous strength, indicating a potential shift in market dynamics.

US INTEREST RATES COULD SPELL DISASTER FOR DOLLAR

In the past few years, the US dollar had appreciated on greater demand from higher interest rates; however, lower rates could be its undoing. As the Federal Reserve contemplates rate cuts, the dollar's strength is at risk. Lower interest rates typically reduce the demand for the dollar, potentially leading to further declines. The potential for significant rate cuts could exacerbate the dollar's decline, especially if recession fears materialize.

GBP/USD TRADING ABOVE 1.3000

The British pound has broken above the 1.3000 mark against the US dollar, a level it hasn't consistently traded above since 2022. In 2021, GBP/USD traded as high as 1.4000, showcasing the potential for further gains if the current trend continues. The pound's recent strength against the dollar signals a critical resistance point for USD.

Screenshot_2024-08-22_at_11.54.46_AM.png

US UNEMPLOYMENT HIGHEST SINCE 2021

Worsening US data, including employment and manufacturing figures, is contributing to the decline in USD prices. The US unemployment rate is now at its highest since 2021 (4.3%), which shocked markets and sent historic volatility into US markets. Recession fears have since subsided after calm inflation rates and low jobless claims, but it is clear that traders are apprehensive of the current ecosystem and the absence of rate cuts so far.

IS USD ABOUT TO CRASH? OR IS IT MEAN REVERSION?

The softening US data could be causing a long-term reversion to the mean for the US dollar. While some fear a potential crash, others see this as a natural adjustment to average levels. In pairs like USD/JPY, still near historic highs, there is a lot of historic room to fall while remaining above long-term averages.

How to trade US dollar

  1. Open an account to get started, or practice on a demo account
  2. Choose your forex trading platform
  3. Open, monitor, and close positions on USD pairs

Trading forex requires an account with a forex provider like tastyfx. Many traders also watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.

Reviewed by:
Glen Frybarger
Senior Content Strategist, Chicago