Key Points
- Dollar index (USDX) slipped 0.2% to 97.941, pressured by shutdown concerns.
- White House meeting and Senate vote will decide if government funding extends past Tuesday.
- Trump escalated political pressure on the Fed with a cartoon depicting Powell’s dismissal.
The dollar index (USDX) dropped 0.29% to 97.544 on Monday, extending its retreat as traders braced for a potential U.S. government shutdown. The White House is set to hold a meeting later today, ahead of a Senate vote expected to determine whether government funding continues beyond Tuesday.
Analysts warned that a shutdown would not only stall upcoming economic data releases but also complicate the Federal Reserve’s policy guidance.
Political risk added to market jitters after President Donald Trump posted a cartoon on his Truth Social account showing him firing Fed Chair Jerome Powell.
The post stoked concerns about central bank independence at a time when traders are already debating the pace and scale of rate cuts following last week’s strong U.S. data.
The USDX index, last seen at 97.941, has now fallen back towards its mid-September range, testing levels that leave it vulnerable to further losses should lawmakers fail to secure a funding extension.
Technical Analysis
The US Dollar Index (USDX) is currently at 97.54, down 0.29% on the day, resuming its downward trajectory after briefly testing higher ground last week. The broader picture remains weak, with the index still unable to break convincingly above the 98.00–99.00 resistance zone, and well below the March peak of 107.57.
Since bottoming at 95.82 earlier this month, the USDX has attempted a rebound, but the move has lacked conviction.
Price action continues to track below the 30-day moving average, which is sloping downward, while the shorter-term 5- and 10-day averages show choppy sideways movement. This suggests the dollar is struggling to establish a trend, with sellers retaining the upper hand.
The MACD indicator offers a mixed picture. While the MACD line has crossed above the signal line recently, hinting at short-term bullish momentum.
The histogram shows declining strength, reflecting the lack of follow-through buying. This aligns with the failure to hold above the 98.00 level, turning the recent bounce into a potential dead-cat rally.
From here, the key levels to watch are 97.00 as immediate support, followed by the cycle low at 95.82. On the upside, 98.50–99.00 remains the critical resistance band.
A decisive break above that range could trigger a broader recovery, but as long as USDX stays capped, the bias remains tilted to the downside.
Cautious Forecast
The dollar is likely to remain under pressure in the short term as shutdown headlines dominate sentiment. A deal in Congress could stabilise the index back towards 98, but failure to resolve the funding standoff risks accelerating declines towards 96.
In parallel, continued political attacks on the Fed could dampen confidence in the central bank’s independence, leaving the greenback more sensitive to upcoming inflation and labour data.
