U.S. Dollar Weakens as Government Shutdown Nears Possible Resolution

Key Takeaways:

*Fed policy uncertainty, dovish signals from Governor Miran, and a prolonged U.S. government shutdown are pressuring the dollar.

*Conflicting views from officials like Hammack and Jefferson create a “wait-and-see” environment, capping dollars upside.

*High deficits, shutdown-related economic drag, and political uncertainty bolster gold’s appeal as a safe-haven asset.

Market Summary:

The longest government shutdown in U.S. history may soon come to an end after the Senate cleared an initial hurdle for a compromise funding bill late on Sunday. However, uncertainty remains over the timeline for final approval, as both chambers of Congress must still vote before the deal can be sent to President Donald Trump for signing.

The prolonged shutdown has significantly affected economic and social activities across the U.S. — with air traffic control staffing shortages leading to one of the most disrupted weekends for airports since the crisis began. The continued government closure has dampened business confidence, disrupted data releases, and weighed on overall economic sentiment.

The U.S. dollar index (DXY) retreated toward the 99.55 support level, tilting toward a more bearish bias as market participants grew increasingly concerned about the economic toll of the shutdown. Although hopes of a deal offered brief relief, prolonged delays and political gridlock have kept the dollar’s outlook subdued.

At the same time, gold prices climbed to a two-week high, benefiting from safe-haven demand as investors reassessed the U.S. growth outlook. Economic data released last week highlighted rising downside risks — the U.S. economy shed jobs in October, with losses in both government and retail sectors, while consumer sentiment fell sharply in early November amid uncertainty over the shutdown’s duration.

With concerns over slowing activity mounting, rate-cut expectations resurfaced, further fueling gold’s rebound and reducing the dollar’s appeal. Overall, sentiment remains cautious as markets await a final resolution to the political impasse and clearer signals on the U.S. economic trajectory.

Technical Analysis

Dollar Index, H4

The Dollar Index remains under mild pressure, consolidating near the 99.55 support area — a critical level that has held since late October. Price action shows a symmetrical consolidation pattern, indicating market indecision but with a slight downside bias as sellers continue to test this key support zone.

From an indicator perspective, the MACD has begun to flatten near the zero line and formed a bullish crossover, signaling fading downside momentum and the potential for short-term recovery. The RSI at 51 has rebounded from oversold conditions, suggesting a neutral-to-slightly-bullish setup.

If the index sustains above 99.55, a rebound toward 100.25 (near the 50-period EMA) remains likely, followed by an extension toward 101.30, where the previous lower high resides. However, a decisive break below 99.55 would invalidate the recovery scenario and expose the index to deeper correction toward 98.70, potentially aligning with the longer-term ascending trendline.

Resistance Levels: 100.25, 101.30
Support Levels: 99.55, 98.70

Gold, H4

Gold continues to exhibit strong bullish structure, maintaining higher highs and higher lows since early November. The metal is now testing 4135.00, a critical resistance aligned with the upper boundary of its short-term ascending channel.

Momentum indicators remain supportive but suggest caution. The MACD shows positive momentum above the zero line, although the histogram indicates early signs of slowing buying pressure. The RSI at 76 signals an overbought condition, implying that a minor correction or sideways consolidation could occur before further upside.

If gold successfully breaks and holds above 4135.00, it would confirm continuation of the bullish trend, with the next target at 4235.00. Conversely, failure to sustain above resistance could trigger profit-taking and a retracement toward 4045.00, with a deeper pullback toward 3920.00 possible if the momentum fades more sharply.

Resistance Levels: 4135.00, 4235.00
Support Levels: 4045.00, 3920.00