News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bullish
Oil - US Crude
Bearish
Wall Street
Mixed
Gold
Mixed
GBP/USD
Mixed
USD/JPY
Bullish
More View more
Real Time News
  • Implementing a trading checklist is a vital part of the trading process because it helps traders to stay disciplined, stick to the trading plan, and builds confidence. Learn how to stick to the plan, stay disciplined, and use a checklist here: https://t.co/SQUCCZ9dzS https://t.co/KD6mfkiCaW
  • What are some technical and fundamental factors affecting the equities market? Get your free forecast here: https://t.co/YQG1aaIT8C #DailyFXGuides https://t.co/TEoSjMpMBo
  • Use this technical analysis pattern recognition skills test to sharpen your knowledge: https://t.co/Qgz89PTxnu https://t.co/H9fW9ewiQd
  • Get your snapshot update of the of market open and closing times for each major trading hub around the globe here: https://t.co/BgZLFljIhZ https://t.co/yLt0ldtMsV
  • What suits your style of trading stocks or commodities? Find out what are the differences in these two markets here: https://t.co/BnA07cMV0s https://t.co/ZwwuTzTeac
  • What's the difference between leading and lagging indicators? Find out from here: https://t.co/vGx8HCagF5 https://t.co/4DGXwA8vqs
  • Struggling to define key levels? Floor-Trader Pivots assist traders in identifying areas in a chart where price is likely to approach and can be used to set appropriate targets, while effectively managing risk. Learn how to use this indicator here: https://t.co/Ye4m1FMKUW https://t.co/mAMhWbV6Jy
  • Make smart trading decisions with your free guide to trade the news. Download your free guide here.https://t.co/pb5E2KgRzW #DailyFXGuides https://t.co/E9ZmJvqO0z
  • Currency exchange rates are impacted by several factors. Are different world leaders a contributing factor? Find out here: https://t.co/4jsORznRTE https://t.co/fqxw1AoKc1
  • Gold snapped a two-week losing streak but keeps price within the broader August downtrend. These are the levels that matter on the $XAUUSD weekly chart. Get your market update from @MBForex here: https://t.co/B3Jct6mIBD https://t.co/xTGIM2hRBv
Despite Shutdown, Disaster Is Still 16 Days Away

Despite Shutdown, Disaster Is Still 16 Days Away

Kathy Lien, Technical Strategist

Although Congress failed to compromise in time to avoid a government shutdown, the dollar impact is likely to be modest unless no deal is done before a first-ever US debt default on or before October 17.

Unless members of Congress suddenly shift their tone and put political differences aside, large sections of the US government will be shut down before the Tuesday open. Many have been holding out hope that there would be a last-minute compromise, but there has been absolutely no progress on the budget negotiations.

The Senate swiftly rejected the spending bill submitted by the House and returned a version that strips out a one-year delay to the controversial Affordable Health Care Act. The proposal of a one-week temporary stop-gap measure was also quickly rejected by Republicans, who said "it doesn't make any progress in the right direction."

In other words, we are right back where we started before the weekend, and at this stage, we have to consider how the US dollar (USD) will react to the first government shutdown in 17 years. While the looming shutdown weighed on US equities on Monday, there has been only a limited selloff in the greenback.

The dollar index lost more than 2% of its value since the beginning of September in anticipation of the dysfunction in Washington, but with the October 1 deadline now here, the pressure on politicians to compromise will only intensify.

As shown in the chart of the dollar index below, the last time the US government was shut down, the dollar dropped only 0.5% and recovered quickly thereafter. Similar price action can be seen in USDJPY, which leads us to believe that while the dollar will most likely extend its losses tomorrow, the selloff should be limited.

Guest Commentary: Can the Dollar Weather the Shutdown?

Despite_Shutdown_Disaster_Is_Still_16_Days_Away_body_GuestCommentary_KathyLien_September30B.png, Despite Shutdown, Disaster Is Still 16 Days Away

According to Treasury Secretary Jack Lew, the US government will reach its debt limit no later than October 17, and the US will effectively default on its loans for the first time ever if the debt ceiling is not increased by that date. The consequences of a default would border on catastrophic, and Republicans and Democrats are both keenly aware of the risks. Now, even if a shutdown occurs, Congress has another 16 days to compromise, and we firmly believe that they will at least pass a temporary measure to fund the government for a few more months.

By Kathy Lien of BK Asset Management

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES