Dollar Edges Up After Shutdown, Gold Retreats Amid Easing Market Risks

Key Takeaways:

*Dollar Index rebounds modestly after US government shutdown resolution, despite lingering economic uncertainties

*Gold pulls back from resistance amid easing safe-haven demand and rising US Treasury yields.

*Fed officials signal caution on rate cuts, supporting the dollar and tempering near-term bullish sentiment for gold.

Market Summary:

The Dollar Index (DXY) remained under pressure for most of last week, reflecting lingering skepticism about the US economic outlook even as the historic 42-day government shutdown came to an end. On Friday, the dollar staged a modest rebound, supported by market expectations that Federal Reserve officials may adopt a more cautious stance on further easing, amid signs of labor market stability and ongoing inflation concerns.

Recent comments from Fed officials—including St. Louis Fed President James Bullard, Cleveland Fed President Loretta Mester, and Minneapolis Fed President Neel Kashkari—highlighted caution around immediate rate cuts. Following the shutdown resolution, the market’s probability for a December rate reduction dropped sharply, falling from around 90% to roughly 50%, reinforcing the dollar’s short-term support. Despite this rebound, the broader weekly trend remained downbeat as investors continue to weigh the sustainability of US economic growth.

Gold prices initially surged on safe-haven flows during the shutdown, but retreated later in the week amid profit-taking and diminishing risk-off demand. Rising US Treasury yields and lower expectations for near-term Fed easing added further pressure, while the easing of shutdown-related risks and trade tensions reduced some of the metal’s appeal. Nonetheless, gold’s medium-term outlook remains constructive, as unresolved structural issues—including trade disputes and broader fiscal constraints—could continue to support demand for non-yielding assets.

Looking Ahead:
Market participants will monitor upcoming US economic data releases, including inflation, employment, and consumer spending figures, for signals on the Fed’s policy path. Trade developments and fiscal policy negotiations will also remain key drivers for both the dollar and gold in the near term.

Technical Analysis

GOLD, H4

Gold prices are trading lower following a sharp retracement from the key resistance level at 4,220.00. The MACD shows increasing bearish momentum, while the RSI at 46 signals potential for further downside. Market participants are closely watching the 4,075.00 support level—a confirmed break below this zone could extend losses toward the next major support at 3,925.00, with 4,000 serving as an initial psychological floor.

However, momentum indicators are showing signs of fading bearish pressure, with both MACD and RSI flattening, suggesting that downside may be limited. If gold fails to break below 4,075.00, a rebound toward resistance at 4,220.00 could occur, potentially testing the upper resistance zone at 4,370.00

Resistance level: 4220.00, 4370.00

Support level: 4075.00, 3925.00

DOLLAR_INDX, H4

The dollar index, trading against a basket of six major currencies, has rebounded and is currently retesting the resistance at 99.45. The MACD shows strengthening bullish momentum, while the RSI at 43 has bounced sharply from oversold levels, suggesting potential for a further upward move.

Market participants are closely watching the 99.45 resistance level for confirmation. A successful breakout could pave the way for an extension toward the next resistance at 100.25. Conversely, failure to breach this level may trigger a retracement toward support at 98.70, keeping the index within its broader bearish structure following the earlier breakdown below the upward trendline. Monitoring the outcome of this retest is critical for identifying the next directional move.

Resistance Levels: 99.45, 100.25

Support Levels: 98.70, 98.05