The US Dollar Index (DXY), which measures the dollar against six major currencies, is currently trading around 99.20 in European markets. It has been moving upwards within an ascending channel, suggesting a positive short-term outlook. The index is above both the nine-day and 50-day Exponential Moving Averages (EMAs). The Relative Strength Index (RSI) is at 58.57, indicating strong momentum without hitting overbought territories. Immediate resistance is at an eight-week high of 99.57, with the possibility of reaching 99.70 next. If the index breaks through these levels, the seven-month high of 100.26 could be in play.

Support Levels

On the downside, the index is testing support at the nine-day EMA, which is at 99.06, and the psychological level of 99.00. If it breaks below these points, it could drop to 98.80 at the 50-day EMA or further down to 98.60 at the lower boundary of the channel. A more significant decline might target 97.75, the lowest level since October 25. The US Dollar’s performance has shown percentage changes against major currencies, particularly being the weakest versus the Swiss Franc. Changes have also been observed against currencies like the Euro and Yen. These fluctuations reflect wider market trends shaped by global factors, including political and economic events. The Dollar Index still presents a bullish trend, currently trading around 104.50. Historical analysis from late 2019 shows a similar upward trajectory, although then it was closer to the 99.00 level. This background illustrates a long-term strengthening trend for the dollar. This current strength is backed by recent economic data, as the December 2025 jobs report revealed an impressive gain of 210,000 non-farm payrolls. This robust job market allows the Federal Reserve to keep its interest rate policy steady without immediate pressure to make cuts. We are closely monitoring any potential softening in the Fed’s aggressive stance in the upcoming weeks.

Trading Strategy

For derivative traders, this situation presents an opportunity to explore strategies with defined risk, such as bull call spreads on the DXY or related ETFs. This would allow participation in potential gains toward the psychological resistance of 105.00 while limiting downside risk if the market shifts. The key is to prepare for continued strength but stay protected against any abrupt changes in Fed policy. Technical analysis from 2019 indicated that 99.57 was a major resistance level, which was eventually surpassed. Today, we are observing a similar situation near the 105.00 mark, with immediate support located around the 50-day EMA at 103.80. A sustained break above 105.00 could trigger a new round of buying, aiming for the highs seen in late 2024. It’s important to note how market drivers have shifted since the trade-war concerns that influenced the 2019-2020 period. Back then, markets were reacting to tariff threats, while today, the focus is primarily on inflation data and central bank policies. The upcoming Consumer Price Index (CPI) report for January 2026 is likely to be a significant catalyst for market movement, more so than any geopolitical news. Create your live VT Markets account and start trading now.

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