Late January proved exceptionally volatile in the currency markets, as reflected by the ATR indicator. However, following the rebound from the four-year low (B), price swings on the DXY chart have narrowed, suggesting a degree of market stabilisation.
Friday’s CPI release had the potential to trigger sharp moves in the US dollar index, yet no major surprises emerged. According to Forex Factory data, the actual figures were broadly in line with analysts’ forecasts (inflation eased slightly as expected), and market participants headed into the long weekend, with US financial markets closed on Monday for Presidents’ Day.
On 27 January, when analysing the Dollar Index (DXY) chart, we:
→ updated the descending channel (marked in red);
→ noted that DXY was trading near a long-term support zone from which price had rebounded twice in the second half of 2025;
→ suggested that the downward momentum could be losing strength.
However, the market had other plans. Although the rally towards peak C (the former support level) is a clear sign that bearish pressure is fading, it was preceded by a false downside breakout of the aforementioned support area.
Swing analysis also points to stabilisation, based on the proportional structure:
→ peak C formed within the 50%–61.8% retracement of the A→B impulse;
→ trough D developed within the 50%–61.8% retracement of the B→C move;
→ peak E emerged within the 50%–61.8% retracement of the C→D impulse.
The previously highlighted support zone is now acting as a range where supply and demand appear balanced.
While the descending channel remains technically valid, the confident trajectory (indicated by the arrow) from the B low suggests that bears may struggle to maintain the prevailing trend of recent months.
