Fundamental Note: DXY(USD) 26 Jan 2026DXY starts the week hovering near the 97 handle and around four-month lows as investors reassess the dollar’s “safe-haven” role amid rising policy/geopolitical uncertainty and increased FX-hedging by foreign holders of US assets. The key event is the Fed’s Jan 28 FOMC meeting, where rates are widely expected to be kept unchanged and the market will trade off Powell’s tone rather than new projections. Beyond the policy statement, the Fed-independence narrative is a real macro risk premium now, with political pressure and legal/probe headlines potentially impacting USD confidence and rate expectations simultaneously. US Treasuries are the second big driver: this week’s heavy auction slate (2Y/5Y/7Y) can swing front-end yields and the curve, which usually feeds directly into DXY momentum. However, if investors demand higher term premium because of Fed credibility/fiscal-policy concerns, long yields can rise without a “clean” USD bid (a classic setup for choppy, headline-driven DXY). Geopolitics remains two-sided: Greenland-linked US–EU tariff threats and Middle East/Iran risk can spark haven demand, but recent bouts have also pushed flows into gold and other havens while the dollar softened.
Bottom line: DXY is set for a volatility week where Fed communication + Treasury yields + geopolitical headlines decide whether the dollar bounces or stays “sold on rallies.”
🟢 Bullish factors:
1. Fed holds rates and sounds less dovish than market pricing → yields/USD rebound.
2. Firm US data (e.g., durable goods) supporting growth/real yields.
3. Risk-off spikes can still generate short-term USD demand via liquidity preference.
🔴 Bearish factors:
1. Any dovish tilt from Powell (or clearer “cuts by mid-2026” guidance) pressures DXY.
2. Fed-independence/policy uncertainty → more FX hedging / “Sell America” diversification flows.
3. FX-intervention talk around USDJPY can weigh on broad USD sentiment.
🎯 Expected targets: Base-case range trading 98.0–100.0 into/through the FOMC; a hawkish-hold + firmer yields scenario can lift DXY toward 99.8–100.6 , while dovish messaging or renewed Fed-independence headlines risk a slide toward 97.5–96.8 .
