Shutdown Weakens Dollar: Will the DXY Fall Further or is it Ready to Rebound?
The US Dollar Index (DXY) appears to be moving cautiously in the 99.5 to 100 range, after weakening earlier in the week due to increased fiscal uncertainty caused by the partial US government shutdown. This uncertainty has dampened market optimism regarding the short-term US economic outlook.
The US dollar reflects the strength of the US economy against a basket of major global currencies, such as the euro, yen, and pound sterling. Its value is heavily influenced by the Federal Reserve's interest rate policy, macroeconomic data, and global risk sentiment.
Under normal circumstances, the dollar strengthens when the US economy is solid and the Fed is hawkish. However, the current situation is different. The US government shutdown has caused an economic slowdown due to delays in bureaucratic activity and public projects, and the delay in the release of important data such as employment and inflation.
According to a Reuters report, market participants believe this situation has undermined confidence in US fiscal stability, leading some investors to shift to safer assets such as gold and the Japanese yen. "This shutdown has slowed the economy and put pressure on the dollar as fiscal policy uncertainty increases," the report stated.
However, some analysts suggest the dollar could potentially recover if there are signs that the impasse in Congress can be resolved soon. Expectations that the government will return to full operation pushed the DXY slightly higher above 99.50 in recent trading.
Overall, the dollar's fundamentals currently remain neutral to slightly weaker, with additional risks if subsequent economic data shows further weakness.
Technically, the dollar index is in a consolidation phase. The chart shows a "wait and see" pattern with strong resistance around 100.5 and support in the 98-99 area.
If the DXY manages to break through 100.5 with strong volume, the opportunity for strengthening towards 101-102 is wide open. However, if the index breaks back below 98.5, selling pressure could increase, testing the 97.0 area.
Technical indicators such as moving averages and the Relative Strength Index (RSI) indicate still weak momentum. This indicates the market lacks clear direction, reflecting concerns about the slow economic recovery due to the shutdown.
The US government shutdown has been a major factor weighing on the dollar index in recent weeks. Fiscal uncertainty, delayed economic data, and growing expectations of interest rate cuts by the Fed have held back the dollar's strength.
However, if negotiations in the US Congress bear fruit and the government returns to full operation, a dollar rebound is not impossible, at least in the short term.
In the meantime, the dollar's direction still depends on political developments in Washington and monetary policy signals from the Federal Reserve in the coming weeks.
Source: Newsmaker.id
