The US Dollar Index (DXY) ended a turbulent week of trading in a holding pattern, closing at 97.65 on Friday. Investors spent the last five sessions caught in a tug-of-war between renewed inflation anxieties and lingering growth concerns, leaving the Greenback to consolidate rather than commit to a decisive new trend.

Inflation Strikes Back

The defining moment of the week arrived with the release of the January Producer Price Index (PPI), which rose 0.5% month-on-month, significantly outpacing market forecasts of 0.3%. This “hot” print served as a wake-up call for bond markets, challenging the prevailing narrative of rapid disinflation. The data suggests that price pressures in the pipeline remain sticky, effectively reducing the probability of an aggressive easing cycle by the Federal Reserve in the first half of 2026. As a result, Treasury yields firmed up, putting a floor under the Dollar and preventing a deeper slide below the psychological 97.50 handle.

Technical Battleground: The 97.90 Ceiling

From a technical perspective, the attached 5-day chart reveals a market searching for direction. Volatility spiked mid-week (February 26), with the index plummeting to a low near 97.50 before buyers stepped in to defend the level aggressively. However, the subsequent rally lacked the momentum to clear the 97.90 resistance zone, which has capped upside attempts twice this week. The price action suggests a “break-retest” scenario where bears are testing the resolve of the bulls at these lower valuations. The inability to break higher indicates that while the immediate bleeding has stopped, confidence in a sustained Dollar rally remains fragile.

Geopolitics and Global Flows

Beyond the data, the Dollar’s performance was influenced by a mixed global backdrop. Unease surrounding ongoing diplomatic talks—specifically regarding US-Iran nuclear negotiations—and renewed chatter about potential tariff adjustments kept a “safe-haven” bid alive for the currency during dip-buying sessions. Meanwhile, weakness in the Eurozone’s own manufacturing data helped the DXY maintain its relative strength, as the single currency failed to capitalize on the Dollar’s mid-week stumble.

Looking ahead to next week, the focus will shift squarely to labor market data, with traders watching to see if the resilience in inflation is matched by job growth. The DXY sits at a critical juncture: a decisive close above 97.90 could open the door for a recovery toward 98.50, driven by repriced Fed expectations. Conversely, a failure to hold 97.50 would likely signal that the broader downtrend is resuming. Investors should monitor short-term bond yields and headline news closely, as the market remains hypersensitive to any shifts in the macro narrative.