Dollar Slides as Shutdown Clouds Fed Outlook

Key Takeaways:

*U.S. government shutdown furloughs 750K workers, risks delaying NFP release.

*Fed officials push back, citing persistent inflation risks.

*Gold retreats slightly from $3,895 but stays underpinned by safe-haven flows.

Market Summary:

The U.S. Dollar remained under pressure this week, weighed down by political dysfunction and a weakening labor market. The U.S. federal government has officially shut down after Congress failed to pass a funding bill, suspending most services and furloughing 750,000 workers. This marks the first shutdown since 2018–2019 and raises uncertainty over how long it will last. For traders, the key concern is that September’s Nonfarm Payrolls and unemployment data may not be released, depriving the Federal Reserve of critical inputs for its policy outlook.

In the absence of official data, investors have turned to private-sector reports, which signaled a clear slowdown. ADP recorded a surprise contraction of 32,000 jobs in September, while Challenger data showed the weakest hiring plans since 2009 and the highest layoffs since 2020. These developments fueled aggressive market bets on policy easing, with traders pricing a near-certain 25-basis-point cut in October and strong odds of another in December.

The dollar managed to find a fragile floor as Fed officials pushed back against these expectations. Dallas Fed President Lorie Logan emphasized that inflation is still “above target, trending higher,” while Chicago Fed President Austan Goolsbee cautioned against “overly frontloading” cuts. Their remarks slowed the selloff, but with political gridlock threatening GDP and a fragile labor market, the broader trend for the greenback remains tilted to the downside.

Gold, meanwhile, has emerged as the clear beneficiary of this uncertainty. After touching a record near $3,895, the metal eased slightly on profit-taking and a modest dollar rebound. Still, safe-haven demand remains strong, with ETF holdings at a three-year high and major banks reaffirming gold as a top conviction trade, extending targets toward $4,000. With the Fed potentially forced to “fly blind” if the shutdown drags on, dips in gold are likely to be treated as buying opportunities as political and monetary risks continue to dominate.

Technical Analysis

DXY, H4

The U.S. Dollar Index (DXY) is consolidating below the 98.10 resistance after rebounding from support near 97.55. Price action has recently broken above a descending trendline but has struggled to sustain momentum, suggesting that the recovery may be losing steam. A decisive push above 98.10 would shift focus toward 98.75, while failure to hold 97.55 could see renewed downside toward 97.00 .

RSI is currently at 48, hovering around neutral territory, reflecting the lack of strong directional momentum. MACD is flat just below the zero line, signaling weak bullish pressure and leaving the index vulnerable to renewed selling if buyers fail to regain control.

Overall, DXY remains in a fragile recovery phase, with the 97.50–98.10 range acting as the immediate pivot. A breakout above resistance could provide the dollar with renewed strength, while a slip back below support risks reestablishing the broader bearish bias. Traders will be watching U.S. fiscal headlines and upcoming data releases as key catalysts for the next move.

Resistance levels: 98.10, 98.75
Support levels: 97.55, 97.00

XAUUSD, H4

Gold has recently pulled back after testing the $3,870 zone, which aligns closely with the 1.272 Fibonacci extension. The uptrend remains intact as long as the price stays above the $3,790 support level, which coincides with the 20-period moving average on the chart. A sustained hold above this area could see buyers regaining momentum to retest $3,890, with the next target at the 1.618 Fibonacci extension near $3,965. On the downside, a break below $3,790 would expose deeper support at $3,730, followed by $3,645.

Momentum indicators suggest consolidation rather than strong momentum at this stage. The RSI is holding around 55, showing neutral bias after easing from overbought levels. Meanwhile, the MACD has turned lower, with histogram bars in negative territory, indicating slowing bullish momentum and the possibility of further sideways to corrective movement before the next leg higher.

Overall, Gold remains in a medium-term bullish structure, but in the short term, price action suggests consolidation. Traders will be watching the $3,790 support zone for clues holding above it favors another push toward $3,870, while a breakdown could trigger a deeper retracement.

Resistance levels: 3870.00, 3965.00
Support levels: 3790.00, 3735.00