Traders expect the dollar to fall

Demand for the currency shifts left. Supply of the currency shifts right.

Anyone expecting the dollar to fall wants to hold fewer dollars now. Europeans buy fewer dollars at every exchange rate, so demand shifts left. Americans and others holding dollars sell them for euros before the fall, so the supply of dollars shifts right. Both shifts lower the exchange rate today. Quantity is ambiguous because the shifts pull it in opposite directions.

The dollar depreciates against the euro now, while the quantity traded may rise or fall.

Common mistake. Students sometimes shift only one curve, or shift demand right because 'traders want to trade dollars.' Expected depreciation makes people want to get out of dollars, on both sides of the market.