The week of January 25 – February 1, 2026, the DXY (US Dollar Index) is entering its most volatile and "make-or-break" period of the month.
The combination of the FOMC meeting, new tariff announcements, and high-impact data suggests a bullish-to-volatile bias for the dollar.
1. The "Big Three" Events for DXY
The calendar shows a cluster of "Red Folder" events that will directly dictate the DXY's direction:
✅ FOMC Interest Rate & Statement (Wed, Jan 28): Market Expectation: The Fed is widely expected to hold rates steady at 3.50%–3.75%.
✅ DXY Impact: Since a "hold" is already 95% priced in, the volatility will come from the Statement and Powell’s Press Conference. If the Fed expresses concern over "sticky" inflation or the resilient labor market (as seen in recent sub-200k Jobless Claims), the DXY could rally toward 99.50 – 100.00 as traders push rate-cut expectations further into mid-2026.
✅ Tariff Headlines (The "Trump Factor"):
✅ Fresh news (as of Jan 18) indicates a 10% tariff on European goods starting February
2. DXY Impact: This is fundamentally USD bullish. Tariffs typically lead to "safe-haven" flows into the dollar and put downward pressure on the Euro (the largest component of the DXY). Expect the DXY to find strong support on any dips because of this.
✅ US PPI & Unemployment Claims (Thu/Fri):
✅ If Thursday’s Jobless Claims remain low and Friday’s PPI (Producer Price Index) shows rising costs, it confirms the "higher for longer" narrative, providing a second leg for a DXY rally.
3. Relative Strength (CAD & AUD)
The calendar also features the Bank of Canada (BoC) rate decision and Australian CPI:
✅ USD/CAD: The BoC is expected to hold at 2.25%. If they sound more dovish than the Fed (which is likely), USD/CAD could climb, helping the DXY stay elevated.
✅AUD/USD: High Australian inflation could temporarily weaken the DXY (by strengthening the AUD), but the FOMC on Wednesday will likely overshadow this by the New York session.
4. Summary of Expectations
| Level | Sentiment | Technical/Fundamental Driver |
|---|---|---|
| Resistance (Target) | 100.00 | Psychological barrier; requires hawkish FOMC tone + Tariff fears. |
| Pivot/Current | 99.10 | DXY is currently paring losses and stabilizing. |
| Support | 98.00 | Major floor; unlikely to break unless the Fed surprisingly signals a March cut. |
Based on the DXY analysis and our specific interest in EUR/USD and USD/CAD, here is how the upcoming high-impact week (January 25–30, 2026) is likely to play out for these pairs.
1. EUR/USD: The "Tariff Trap"
The Euro is currently the most vulnerable major currency due to the looming 10% US tariffs on European goods (effective Feb 1).
✅ Current State: Trading around 1.1600, testing a major psychological floor.
✅ The FOMC Impact: If the Fed holds rates (as expected) and sounds hawkish, EUR/USD is likely to break below its descending channel support.
2. Key Levels:
✅ Resistance: 1.1655 (4H 50-MA) and 1.1700. Any rally into this zone before Wednesday is a "sell-the-rip" opportunity.
✅ Support/Target: A break below 1.1580 opens the door for a slide toward 1.1550 and potentially 1.1470 by Friday's close.
3. USD/CAD: The "Divergence Play"
This pair is the one to watch on Wednesday, Jan 28, as you have the Bank of Canada (BoC) and the Fed on the same day.
✅ The BoC Meeting (10:00 AM ET): The BoC is expected to hold at 2.25%, significantly lower than the Fed's 3.50%–3.75%. If the BoC emphasizes Canada's slowing growth, the "Policy Divergence" will push USD/CAD higher.
✅ Technical Setup: The pair is currently rejecting the 1.3870–1.3900 pivot zone.
4. Key Levels:
✅ Bullish Breakout: A daily close above 1.3950 targets the major 1.4000 psychological level.
✅ Support: If the BoC is surprisingly hawkish, look for a dip to 1.3800, which would be a high-probability "Buy the Dip" zone given the overall DXY strength.
High-Impact Trading Strategy (Jan 26 - Jan 30)
| Day | Event | Strategy |
|---|---|---|
| Mon/Tue | Pre-FOMC drift | Range trade. DXY likely to consolidate between 99.10 - 99.50. |
| Wed Morning | BoC Decision | Watch USD/CAD for a breakout if BoC remains dovish. |
| Wed Afternoon | FOMC / Powell | High Volatility. If Powell mentions "Inflation Risks," Buy DXY / Sell EUR/USD. |
| Thu/Fri | PPI & Claims | Confirmation. If data is hot, DXY targets 100.40 (the November highs). |
5. Quick Risk Summary
✅ EUR/USD: Bearish bias. Target 1.1550.
✅ USD/CAD: Bullish bias. Target 1.4000.
✅ DXY: Testing 99.50; a break here targets 100.40.
Based on the latest data for January 18, 2026, here are the specific technical entry levels and order blocks for EUR/USD and USD/CAD heading into the FOMC and BoC news week.
1. EUR/USD (Current: 1.1606)
The pair is currently hovering just above a major multi-week support level.
✅ Bearish Order Block (Supply Zone): Look for entries at 1.1655 – 1.1690. This area aligns with the 4H 50-MA and recent lower-high resistance.
✅ The Trade Idea: If the Fed remains hawkish on Wednesday, a "sell the rip" into this zone is preferred.
✅ Target (Liquidity): 1.1550. If that breaks, the next major floor is the psychological 1.1500 level.
✅ Stop Loss: Above 1.1730 (invalidates the short-term bearish structure).
2. USD/CAD (Current: 1.3924)
USD/CAD has been in a steady uptrend throughout January and is now testing the high ground ahead of Wednesday's "double-header" (BoC and FOMC).
✅ Bullish Order Block (Demand Zone): A high-probability buy zone sits at 1.3875 – 1.3890. This was the previous resistance that has now flipped to support.
✅ The Trade Idea: Wait for a "news spike" or dip into this support zone during the BoC meeting. If the BoC holds rates (as expected) and sounds dovish, buy the rejection from this block.
✅ Target: 1.4000. This is a major psychological milestone that the market has been eyeing since the start of the year.
✅ Stop Loss: Below 1.3840 (the base of the most recent bullish impulse).
Summary of Wednesday's Strategy (Jan 28, 2026)
| Pair | Entry Zone | Direction | Target | Rationale |
|---|---|---|---|---|
| EUR/USD | 1.1655 | SELL | 1.1550 | 4H 50-MA Resistance + US Tariff Pressure |
| USD/CAD | 1.3885 | BUY | 1.4000 | Polciy Divergence (Hawkish Fed / Dovish BoC) |
Pro Tip: Be cautious about holding trades through the exact 2:00 PM ET FOMC release. Often, there is a "stop hunt" spike in both directions before the real trend for the rest of the week is established.
I wish you all the best more blue 💙 🔵 and less red ♥️ 🍒
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