Published: 3 February 2026,03:37
Daily Market Analysis New
* The USD rebounded sharply after Kevin Warsh’s Fed Chair nomination eased fears of an aggressively dovish Fed.
*Warsh’s reputation for balance-sheet discipline restored confidence in U.S. monetary credibility.
*U.S. manufacturing data reinforced growth expectations, supporting higher yields and a stronger dollar.
Market Summary:
The U.S. dollar has staged a decisive recovery since late Friday, extending gains through the European and early U.S. sessions as markets recalibrated long-term monetary policy expectations following President Trump’s nomination of Kevin Warsh as the next Federal Reserve Chair. While confirmation is still pending and the transition would only take place in May, the signal effect was immediate: investors rapidly priced out the risk of an overtly politicized, aggressively dovish Federal Reserve.
Warsh’s reputation as a defender of institutional credibility and balance-sheet discipline sharply reduced fears of currency debasement that had dominated market psychology earlier in January. This triggered a broad repricing across rates and FX markets, with U.S. yields moving higher at the front end and the Dollar Index rebounding from deeply oversold levels. The move was reinforced by U.S. manufacturing data, where both the revised S&P Global PMI and the ISM manufacturing survey pointed to the strongest momentum since 2020, driven by a sharp pickup in new orders.
Importantly, the dollar’s advance has not been purely speculative. FX and bond markets have responded to tangible improvements in growth expectations, with two-year Treasury yields climbing and rate-cut expectations pushed further into the year. The euro’s break below the 1.18 handle and renewed weakness in commodity-linked currencies underscore that the dollar’s recovery is increasingly rooted in relative growth and policy credibility rather than simple short covering.
That said, the sustainability of the dollar’s rally now becomes data-dependent. This week’s labor market indicators particularly JOLTS and Friday’s Non-Farm Payrolls will determine whether the market can justify a more durable hawkish repricing. A strong employment backdrop would reinforce the dollar’s newfound support, while material disappointment could reopen the debate around mid-year rate cuts and temper upside momentum.
Technical Analysis
The U.S. Dollar Index has staged a technical rebound on the chart after finding strong demand near the 95.30 support level, marking a short-term base following an aggressive selloff from January highs. Price had decisively broken below the 97.90 support region, accelerating downside momentum and briefly driving the index into oversold territory. However, selling pressure has since eased, with buyers stepping in to defend the lower bound of the multi-month range. The subsequent bounce has lifted DXY back above 96.70, suggesting a corrective recovery is underway.
Momentum indicators support the rebound narrative. RSI has recovered from near-oversold levels and is now trending higher above 50, while MACD has flipped positive with a rising histogram, signaling improving upside momentum in the near term.
Resistance Levels: 97.90, 99.60
Support Levels: 96.70, 95.35
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