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Sentiment in the financial markets always gets re-balanced by two variables: time and price. The U.S. dollar underwent a massive bear market from 2002-2008, and bearish sentiment by the end of that bear market reigned supreme. But as dollar bears grew louder in 2008, with the expectation that commodities and foreign currencies were the only way to escape the falling dollar, the bear market in the dollar ended.
The dollar since then has undergone 3 separate rallies. The first one unwound all the bearish trades against the dollar in 2008 as it underwent a massive bounce during the financial panic. At the time this seemed counter-intuitive to many but in reality the bear trade on the dollar was the overcrowded trade. Next the dollar had a massive rally in 2010 as the market feared the Euro would disappear due to European debt issues. That rally was then unwound as fears over the Euro dissipated. Fear returned to the U.S. dollar in 2011 as money printing by the Federal Reserve became a main focus. I remember specifically how the bearish sentiment in the dollar was intense in April 2011 as Bernanke started holding regular news conferences. It didn’t look like Bernanke was going to be able to stop the dollar from breaking the 2008 low and going into a free fall.