The US dollar is showing renewed strength as traders respond to a softer Fed stance and escalating geopolitical risks. With monetary policy easing on the horizon and safe-haven demand rising, the greenback is holding firm despite market volatility.

Fed policy shift boosts dollar momentum

The US Dollar Index (USDX) remained resilient near 98.9 on Thursday, consolidating after a week of sharp movements influenced by central bank messaging and heightened geopolitical uncertainty.

The index ended the day at 98.641, slightly below its intraday peak of 98.671, yet holding above a key resistance zone—a sign of sustained bullish momentum.

This strength in the US dollar followed the Federal Reserve’s latest policy update, where the central bank kept interest rates unchanged but adopted a more dovish tone than markets had expected.

Chair Jerome Powell highlighted potential inflationary pressures driven by trade tensions and tariff-related disruptions under President Trump’s policies, warning that price growth could reaccelerate.

In a surprise move, the Fed revised its 2025 forecast, now expecting two 25 basis point rate cuts, up from the previously anticipated one.

This dovish shift has led to significant repositioning across Treasury yields and forex markets, drawing renewed inflows into the greenback.

Geopolitical tensions fuel safe-haven demand

The dollar’s appeal has also been reinforced by its safe-haven status, especially as global risk sentiment deteriorates.

The Israel–Iran conflict, now in its second week, has introduced a war-risk premium across asset classes.

Although US officials have not confirmed any involvement, reports suggest contingency plans are in development in case of further escalation.

Escalating tensions were intensified by a strong warning from Iran’s Supreme Leader Ayatollah Ali Khamenei, who declared that any US military intervention would cause “irreparable damage.”

This rhetoric has driven traders toward defensive assets—with the US dollar among the key beneficiaries in times of heightened uncertainty.

Technical analysis: Bullish momentum intact for USDX

On the 15-minute chart, the US Dollar Index is forming a strong bullish continuation pattern.

After establishing a base near 97.529, the index has steadily moved higher, producing a series of higher lows and higher highs, and reaching 98.641.

The moving averages (5, 10, and 30 periods) are aligned in a bullish formation, with the shorter-term MAs consistently leading above the 30-period average—confirming the current uptrend.

The MACD supports this view, with a positive-expanding histogram and the MACD line remaining above the signal line, both indicating strong upward momentum.

Price briefly consolidated between 98.20 and 98.40, forming a bullish flag pattern that resolved to the upside.

With minimal retracement after breakout, the price is now testing fresh highs, signalling continued buyer dominance.

Looking ahead, the US dollar may continue to benefit from risk-off sentiment in global markets.

However, if inflation pressures return while the Fed remains committed to rate cuts, the greenback could face conflicting macro forces. As long as USDX stays above 98.4, the short-term bullish bias remains intact.

With both dovish signals from the Federal Reserve and escalating Middle East tensions, the US dollar is being supported by a dual narrative of monetary policy recalibration and safe-haven demand.

Technical indicators confirm the bullish outlook, though traders should remain cautious of shifting macroeconomic conditions that could challenge the current trend.

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