US Dollar Index (DXY) tries to break 2026 downtrend despite 14-Year record bear positioning

• The US Dollar maintains its rebound since Warsh's nomination but still seeks momentum
• Recent Inflation data proved weaker than expected, yet the dollar holds
• Dollar Index Technical Analysis ahead of Non-Farm Payrolls

The US Dollar is at the center of traders' attention, and it has been the case ever since Trump was nominated for a second term.

Ever since the beginning of 2026, the Greenback has seen quite a downturn, driven by narratives of a new World Order, one in which the US Dollar wouldn't play a similar role as Market stabilizer.

Exacerbated by the Greenland Crisis and Trump's repeated attempts to devalue the USD, the DXY reached 5-year lows just ahead of the end-of-January FOMC meeting.

Things changed quickly right after Kevin Warsh was nominated to be the next Fed Chair. While the next head of the Federal Reserve is seen as a reformist, relative hawk, he still hasn't said a word, sparking a round of heavy speculation among participants.

An interesting graph regarding his bias was shared on Financial-Net, but some argued that the shifts in his dovishness and hawkishness were more closely tied to actual economic activity. It still leaves room for doubts regarding his tone.

He will still have to be officially nominated by the Senate before his term is confirmed, as Senators like Thom Tillis won't back the vote while Jerome Powell's investigation is still ongoing – it could indeed set a dangerous precedent for Federal Reserve independence.

Nevertheless, with all the bearishness still waning on the US Dollar, it is difficult not to take a contrarian view. Positioning against the Greenback is the most pessimistic since 14 years, and despite the aggressive views, the DXY remains in an 8-month range (between ~96.00 and 100.00).

If data like the recent Non-Farm Payrolls surprise to the upside once again, a short-squeeze in the dollar isn't such an impossible scenario, particularly with the reserve currency not weakening the slightest after Friday's soft CPI.

Don't forget that Friday should see the SCOTUS announcement on the legality of Trump's tariffs – Reactions can be very mixed, but when looking at the reactions last May to them almost getting blocked, their ban could see an upwards reaction.

We’ll dive into an in-depth technical analysis of DXY to examine the current technical outlook for the US Dollar after last week's huge data and ahead of Friday's Core PCE report.

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The Dollar Index has bounced meaningfully from its end-January troughs and is now attempting to breakout of its early 2026 downward channel.

Rebounding this morning on its 97.50 Mid-range pivot area, bears keep a slight advantage but looking further out, it doesn't look like any side is under control.

Contrarian views to the current positioning and absence of reactions to negative Dollar headlines point to a bearish stance that could be overstretched. Let's take a closer look.

Today's trading was very erratic in the US Dollar, seeing a huge bounce throughout the morning session before giving its lead back, now close to unchanged on the day.

Nevertheless, the Index is now back above its 50-period Moving Average, pointing to bulls taking the short-term advantage and the action resembling a breakout-retest formation, prompting further continuation.

A close above 97.60 will be required to confirm further upside.

Levels to place on your DXY charts:

Resistance Levels

• August and mini-range Pivot 97.25 to 97.60
• Mini-resistance 98.80 to 99.00
• 99.40 to 99.50 January Resistance
• 100.376 November highs

Support Levels

• 4H 50-period MA 97.08
• 2025 Lows Major support 96.50 to 97.00 (mini-range lows, 4H 50-MA)
• Early 2022 Consolidation just below 96.00
• Trump USD Flash Crash 95.55
• 95.00 Main psychologic support

Turning to the intraday timeframe, the chart once again looks quite mixed.

The price action really points to a break-retest scenario, but the way the Dollar got rejected after its overnight/morning rally gives more confusing vibes.

To get more clarity, keep a close attention to these levels:

• The 97.00 Key Level should act as strong support, particularly as it coincides with the 4H 50-MA and the counter-trend underpin.
• Any candle close below on high momentum would warrant further downside in the Dollar
• An imminent rebound would require a break above the 97.55 session highs and could then be headed to a test of the early January highs (99.495).
  • Look for FX Pairs which offer interesting setups to profit from these scenarios – GBP/USD, USD/CHF and NZD/USD could be interesting in those aspects (watch out for the RBNZ meeting for the latter).

Safe Trades!

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