US Dollar outlook: DXY holds firm after bounce amid Greenland tensions

Geopolitical risk meets structural support

The Greenland geopolitical tensions — specifically tariff threats and diplomatic friction — initially induced volatility across risk assets and FX markets. Many expected the U.S. Dollar to sell off on rising uncertainty over policy risks and global trade spillover. However, price action tells a more nuanced story.

Rather than a broad risk-off downtrend, DXY found critical demand at a high-probability institutional zone — the Daily Fair Value Gap — anchoring buyers and setting the stage for upside continuation.

This technical development, observed firsthand in the chart you provided, reframes the narrative: geopolitical headlines acted as a trigger, not a trend reversal.

US Dollar: Bullish continuation confirmed after daily FVG reaction

The current US Dollar Index (DXY) price action confirms that buyers remain firmly in control after price respected and reacted precisely from the Daily Fair Value Gap (FVG) between 98.76 – 98.95. This zone acted as a high-probability institutional demand area, providing the structural foundation for the recent upside expansion.

How the bullish scenario materialized

Following heightened geopolitical tension surrounding Greenland and renewed tariff rhetoric, the dollar initially experienced volatility-driven pullbacks. However, instead of collapsing further, price engineered a controlled retracement into inefficiency, aligning with classic Smart Money behavior.

Before:

After:

Price retraced into the Daily Fair Value Gap (98.76–98.95) — a zone of market inefficiency created by prior rapid moves.

The retracement was controlled and did not break structure, indicating that selling pressure was absorbed.

Upon testing this zone, DXY produced bullish displacement — a strong upward impulse — validating institutional acceptance at this level.

Following this, buyers held the higher low and extended the advance, confirming continuation.

Structure and market behavior

After reacting from the Daily FVG, DXY transitioned into a bullish internal structure, as seen by:

• Higher highs and higher lows forming on the 4H timeframe
• Shallow pullbacks respecting internal demand
• Absence of aggressive bearish displacement

The brief consolidation near the highs represents price digestion, not weakness. This is typical when the market pauses to rebalance orders after a strong impulsive move.

Importantly, there was no decisive breakdown back into the FVG, reinforcing that the zone has successfully flipped from mitigation into support.

What this technical validation means for the USD

Despite geopolitical uncertainty tied to Greenland and transatlantic tensions, the dollar’s reaction tells a deeper story. The fact that DXY did not fracture below the Daily FVG — instead rallying from it — reveals that:

• Market participants are structurally bullish on the dollar, even amid geopolitical stress.
• Risk sentiment alone is not driving USD weakness; technical buyers are stepping in at key levels.
• Macro catalysts (headline risk, tariff threats) are fueling volatility but not dominating structural direction.

This dynamic suggests that USD price action is now balancing macro risk awareness with technical strength.

Market impact: FX, safe havens and crosses

US Dollar Index (DXY)

• Daily FVG defended — this is price absorbing supply and shifting control back to buyers.
• With the bullish scenario validated, upside targets re-enter play.

Major FX crosses

• EUR/USD — Corrective bounce may be limited as the USD’s technical strength persists.
• USD/CHF, USD/JPY — Environments where safe-haven flow supports dollar crosses despite broader risk perception.

Safe havens and liquidity

• Gold and other traditional havens continue to rally, but USD strength suggests dual demand — traders are diversifying rather than fleeing dollar exposure outright.

Technical outlook: What comes next

Bullish continuation (primary)

Bullish thesis remains intact as long as:

• Price holds above the 98.76–98.95 Daily FVG
• Higher low structure remains unbroken
• Momentum continues above recent swing lows

Upside targets:

Near-term swing highs (~99.30–99.50)

Further extension toward ~100.00+ if strength persists

The bullish scenario is powerful because it’s not just random upside — it’s structurally validated.

Invalidation / bearish risk

The bullish thesis weakens only if:

• Price closes below the Daily FVG
• Structure breaks with a lower low below 98.76
• Demand absorption fails at the inflection zone

In that case, downside opens into the next broader support cluster.

Conclusion

The US Dollar’s recent price action highlights a shift from geopolitical fear-driven moves to structurally reinforced bullish continuation. The bounce from the Daily FVG wasn’t accidental — it validated buyer commitment and institutional presence.

As long as DXY remains above that critical zone, the bullish scenario is the dominant technical forecast, even in the context of ongoing global tensions. Geopolitical narratives can fuel volatility, but technical structure remains the anchor for directional conviction.