The US Dollar is holding steady, with the Dollar Index around the 100-day moving average at 98.58. While there’s low volatility, analysts from Scotiabank expect possible changes soon.

Key Developments Expected

President Trump might soon announce his choice for Federal Reserve chair, likely supporting easier monetary policies. Governor Miran believes we may need to cut rates by more than 100 basis points this year. Additionally, the US Supreme Court will decide on important cases concerning IEEPA tariffs, which could significantly affect the USD. Most major currencies are stable against the USD. The Mexican Peso is slightly up, and European bond yields have dropped by 4-6 basis points. However, US Treasurys are lagging behind. The Dollar Index is expected to stay in the upper 98 range, facing resistance at the 200-day moving average of 98.88. Looking back to 2025, the US Dollar Index was confined to a narrow range around the 100-day moving average of 98.58. The market was peaceful, but political and judicial events hinted at possible disruptions. This quiet period was viewed as temporary, with significant shifts expected. Indeed, the second half of 2025 brought those shifts. The appointment of a dovish Fed chair and the Supreme Court’s decision to strike down key IEEPA tariffs were strong factors that disrupted the dollar’s stability. The Federal Reserve cut rates by over 100 basis points before the year ended, causing the Dollar Index to drop below 98.

The Current Market Landscape

Now, on January 7, 2026, things have changed a lot. The Dollar Index is now consolidating around 94.00, and currency market volatility is at a 12-month low, with the VIX near 14. After last year’s significant downturn, the market is waiting for a new driving force. This suggests that the aggressive short-selling of the dollar seen in 2025 has likely ended. The latest Non-Farm Payrolls data for December 2025 showed a slight miss at 160,000, reinforcing the idea that the Fed will remain steady. Current data from the CME FedWatch tool indicates that no rate changes are expected for at least the next quarter. With this in mind, derivative traders should think about strategies that take advantage of this lower range and reduced volatility. Selling out-of-the-money strangles on currency pairs like EUR/USD could effectively generate premium, betting that the dollar will stay stable in the upcoming weeks. This focus shifts from predicting a major decline to taking advantage of the current stability. Create your live VT Markets account and start trading now.

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