$DXY

On January 13, 2025, the U.S. Dollar Index (DXY) printed a 2025 yearly high of 110.209 points, marking what ultimately became the peak for the dollar. That week, the index slipped 0.21%, occurring just seven days after President Trump was sworn in, and this move effectively signaled the beginning of a sustained downtrend.

It is important to note that even before Trump assumed office, the DXY had been hovering around the 110-point level and consistently failed to break higher. Signs of underlying weakness were already evident, largely due to markets pricing in future Fed rate cuts and increasing de-dollarization efforts by global central banks.

As of now, the DXY has declined 11.01% YTD, despite a strong Q3 2025 U.S. GDP growth print of 4.3%. This divergence raises a key question: why is the dollar weakening despite solid economic data?

The key drivers include:

-Rate-Cut Expectations: Markets continue to price in Fed rate cuts, capping dollar upside even amid strong growth data. While expectations point to two rate cuts in 2026, forward guidance has already weighed on the currency.

-Global Risk-On Rotation: Improving global growth and stronger emerging market conditions are encouraging capital flows into higher-beta assets at the expense of the dollar.

-De-Dollarization & Reserve Diversification: Central banks are gradually increasing allocations to gold and non-USD currencies, structurally reducing demand for the dollar.

-Renewed Liquidity Expansion: The Fed has paused tightening and resumed balance-sheet expansion, effectively increasing dollar liquidity since December 2025, which naturally pressures the currency.

-Japan Fear-Fear: Continued weakness in the Japanese yen has forced Japan to sell U.S. Treasuries to defend its currency, adding pressure to UST demand and indirectly weighing on the dollar.

Going forward, the 2025 yearly low is a critical level for the DXY. A decisive breakdown below this level could be brutal for USD confidence and reinforce the longer-term bearish structure.

I’m not even done watch out for part 2
Bottom line: This is an index everyone must track closely.

#NFA