The US Dollar surged to two-month highs near 100.00 this week after Fed Chair Powell’s unexpectedly hawkish tone cast doubt on a December rate cut, despite delivering the anticipated 25-basis-point reduction in October. The government shutdown, now entering its 31st day, continues to complicate the economic outlook as major currency pairs saw significant moves.
Fed Delivers Rate Cut, But Signals Caution Ahead
The Federal Reserve cut rates by 25 basis points to 3.75%-4.00% as widely expected at its November meeting. However, Powell’s post-meeting commentary shifted market expectations dramatically. The Fed Chair warned that December’s cut is “far from assured” and emphasized the need for caution given the ongoing government shutdown’s impact on economic data availability.
Markets quickly repriced December cut odds from 91% to 73% following Powell’s remarks. The 10-2 FOMC vote revealed internal dissent, with two members opposing the October cut, further highlighting divisions within the committee about the appropriate policy path.
Dollar Index Breaks Above Psychological 100.00
The US Dollar Index posted its second consecutive week of gains, surging to the psychological 100.00 resistance level—fresh two-month highs. The move was accompanied by climbing Treasury yields as traders adjusted their expectations for the Fed’s easing cycle.
Technical Outlook: The DXY now faces resistance at 100.05 and 101.33, with support at 98.74 and 97.59. A sustained break above 100.00 would target the 101.97 level, while failure to hold would bring the 98.03 support zone into focus.
EUR/USD Plunges to Three-Month Lows
EUR/USD collapsed to levels last seen in early August at 1.1520, marking its second consecutive week of losses. Policy divergence widened dramatically as the ECB held rates steady at 2.00% on Thursday, with President Lagarde stating the bank is “in a good place” and comfortable with tepid European growth.
This contrasts sharply with Powell’s more cautious stance on further Fed easing. Eurozone Q3 GDP printed at 0.2% QoQ (better than 0.1% prior), while October HICP eased to 2.1% from 2.2%.
Technical Analysis: EUR/USD trades below both 20-day and 100-day SMAs, with RSI at 36 confirming bearish momentum. Resistance stands at 1.1605 and 1.1729, while support lies at 1.1472 and 1.1347.
GBP/USD Breaks Six-Month Support at 1.3100
Sterling pierced the 1.3100 support level for the first time since April, marking its fourth consecutive daily decline and second straight month of losses. The Pound faces dual headwinds from Powell’s hawkish Fed comments and mounting UK fiscal concerns ahead of Chancellor Rachel Reeves’s November 26 Autumn Budget.
Markets now price 61% odds of a Bank of England rate cut in December (up from 46% pre-CPI). Thursday’s BoE decision will be critical for near-term direction, with the bank expected to hold at 4% but guidance being the key focus.
Technical Setup: RSI at 30.4 signals oversold conditions, but bearish momentum remains intact. Resistance at 1.3318 and 1.3524, support at 1.2996 and 1.2785.
Equities: S&P 500 Hits Record Highs Despite Fed Caution
The S&P 500 notched its third consecutive weekly advance, rallying 2.6% in October to fresh record highs despite Powell’s hawkish tone. The index gapped up on Friday after CPI data, refusing to fill the gap—a bullish technical signal.
However, momentum indicators show significant divergence at the 6,912 resistance zone, where multiple Fibonacci extensions converge. November historically ranks as the second-strongest month for stocks, but technical divergence suggests potential vulnerability.
Key Levels: Resistance at 6920.16 and 7046.27, with critical support at 6758.02 and 6620.82. A close below 6,700 would warrant increased caution.
Gold Extends Correction Below $4,000
Gold extended its correction for a second consecutive week, falling below $4,000 and forming a powerful monthly reversal candle after reaching a $4,381 record high. The correction accelerated on multiple factors:
- Trump-Xi trade truce easing geopolitical premium
- Powell’s hawkish Fed stance strengthening the Dollar and yields
- Improving risk sentiment reducing safe-haven demand
Technical Structure: Gold broke below the 1.382 Fibonacci extension and upper trend channel, mirroring 2011’s reversal pattern. Resistance at 4129.41 and 4252.94, support at 3887.35 and 3762.15.
Crude Oil Consolidates Amid Mixed Signals
WTI settled at $60.98 after a volatile week, ending October with a third consecutive monthly loss. OPEC+ proposed to increase output by 137,000 bpd, signaling modest supply additions, while Saudi Arabia plans $1.00-$1.50/bbl price cuts to Asian buyers for December.
US production hit a record 13.5 million bpd, with ExxonMobil and Chevron reporting combined Q3 profits of $21.8 billion. Despite inventory draws of 3.1 million barrels, demand concerns persist.
Technical Levels: Resistance at 63.67 and 66.10, support at 58.60 and 56.10.
Bitcoin Pressured by Institutional Outflows
Bitcoin slipped below $110,000, correcting nearly 5% for the week as macroeconomic headwinds intensified. Fed hawkishness and the four-week government shutdown dampened risk appetite, triggering $843 million in liquidations (81% long positions).
Spot Bitcoin ETFs recorded $607 million in weekly outflows through Thursday, signaling fading institutional confidence. The Fear & Greed Index plunged to 29 (near October lows).
Technical Outlook: Resistance at 113656.18 and 117352.24, support at 107171.27 and 103408.01.
Week Ahead: Key Events
Central Bank Calendar:
- Tuesday: Reserve Bank of Australia (expected hold at 3.60%)
- Wednesday: Riksbank, NBP decisions
- Thursday: Bank of England (critical guidance expected)
- Thursday: Norges Bank, Banxico, BNM decisions
Economic Releases:
- Monday: ISM Manufacturing PMI (critical amid data drought)
- Tuesday: JOLTS Job Openings (if government reopens)
- Wednesday: ADP Employment, ISM Services PMI
- Friday: Consumer Credit (delayed data)
Fed Speakers: Multiple Fed officials scheduled throughout the week following the end of the blackout period.
Market Outlook
The coming week pivots on three critical themes: Bank of England guidance following Powell’s hawkish surprise, ISM surveys as the only reliable economic gauges amid the shutdown, and whether the Dollar’s breakout above 100.00 can be sustained.
With the government shutdown at 31 days—approaching the record 35-day length from 2018-2019—economic impacts are mounting. Resolution could trigger delayed data releases, but consensus expects extension into November.
Technical Levels to Watch:
- USDX: Break above 100.00 targets 100.26, then 101.97
- EUR/USD: Break below 1.1500 accelerates to 1.1314
- GBP/USD: Below 1.3100 eyes 1.3000
- Gold: Below $3,970 confirms deeper correction to $3,900-$3,850
- S&P 500: Below 6,669 signals correction; above 6,983 resumes uptrend
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