“We maintain our forecast for further euro appreciation. Global growth momentum remains positive while inflation is subdued — this will likely continue to support the weak US dollar trend and higher euro valuations,” said Invesco. “We continue to view pullbacks in the euro as consolidation within a secular trend that’s generally moving higher.”

Obviously, UUP’s slack year-to-date showing indicates shorting the dollar has been the right way to play the U.S. currency. It may also imply that shorting the dollar has been easy. Moreover, the dollar’s 2017 struggles could be a sign that shorting the greenback is a trade with too many participants.

The yen is one currency the dollar could appreciate against as the Fed raises rates while the Bank of Japan continues its accomodative monetary policies.

“There appears to be a general market view that US and Japanese central bank monetary policies will continue to diverge and that this will push the USD/JPY exchange rate higher,” notes Invesco. “While a weaker yen would likely raise Japanese inflation closer to the Bank of Japan’s 2% target, it could negatively impact consumption in the process, which would not be welcome.”

For more information on the USD, visit our U.S. dollar category.