Macro narrative: Fed cut expected, tone surprised
Last week’s Federal Reserve rate cut (−25 bps to 3.75 %–4.00 %) was widely anticipated. Fed funds futures had priced in nearly 98 % odds of easing ahead of the decision.
But what markets didn’t price was Chair Jerome Powell’s tone.
Instead of confirming a dovish path, Powell told reporters that December’s meeting remains “optional” and that policy is “not on a preset course.”
He warned that incomplete inflation and labor data—delayed by the federal government shutdown—make forecasting difficult, describing policy-making as “driving through fog.”
This shift reframed expectations:
The cut was done, but the path ahead became uncertain.
Traders trimmed bets for a rapid easing cycle.
The dollar recovered as yields stabilized and shorts were forced to cover.
Powell’s tone: Dovish action, Hawkish delivery
Powell balanced caution with confidence:
He acknowledged a softening manufacturing sector (ISM 48.7) and cooler job creation, yet
Stressed that inflation progress remains uneven, and
Rejected the notion of an automatic follow-up cut in December.
The result: a hawkish-dovish hybrid message.
While the Fed delivered easing, Powell’s rhetoric anchored expectations, boosting the US Dollar Index (DXY) off the 99.70 zone as markets priced fewer near-term cuts.
Shutdown effects: Data fog keeps the Dollar in focus
A major subplot now shaping USD sentiment is the ongoing U.S. government shutdown.
Its fiscal impasse has halted or delayed releases from agencies such as the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA)—potentially postponing:
Non-Farm Payrolls (NFP) – previously slated for Nov 8, may be delayed.
Consumer Price Index (CPI) – tentatively Nov 15, could slip if BEA operations remain limited.
Core PCE Inflation and Retail Sales – risk of further postponements.
These delays mean the Fed will face weeks of missing visibility before its December meeting.
For markets, that uncertainty acts as a supportive floor for the USD, since traders hesitate to sell dollars aggressively when the data compass is broken.
In effect, the shutdown functions like a volatility dampener for risk assets and a stability anchor for the dollar: less clarity → tighter spreads → safe-haven demand.
Recent red-folder events
|
Date |
Event |
Actual |
Forecast |
Impact |
|---|---|---|---|---|
|
Oct 29 |
FOMC Rate Decision |
−25 bps |
−25 bps |
High – Fed cut as priced in |
|
Nov 3 |
ISM Manufacturing PMI |
48.7 |
49.4 |
Negative – Growth softens |
|
Nov 6 (est.) |
ISM Services PMI |
TBD |
53.0 |
Pending — Could shift USD bias |
|
Nov 8 (est.) |
NFP Release |
At risk of delay |
– |
Data blackout risk ↑ |
Technical outlook – DXY (4H chart)
Structure and Context
The DXY 4-hour chart shows price consolidating just above a Bullish Fair Value Gap (FVG) and Bullish Order Block (OB) within the 99.60 – 99.90 zone.
This area represents the institutional demand base formed post-FOMC, confirming that large players accumulated positions around the same levels that coincide with Powell’s press conference.
Narrative of price action
The FOMC drop on Oct 29 was retraced and absorbed inside the OB.
Price then produced a clean higher low and reclaimed 99.90, signaling a re-accumulation phase.
The latest 4H candle expansion toward 100.00 – 100.10 aligns with renewed buying interest as volatility contracts around support.
Bullish scenario – Continuation through 100.60
Price remains supported above 99.70 (FVG floor).
- A 4H or daily close above 100.60 confirms bullish continuation.
- Targets: 101.20 → 101.70 (previous FOMC pivot highs).
- Catalysts: Delayed NFP → uncertainty premium; Fed’s cautious tone; continued risk-off sentiment.
Bearish scenario – Rejection and break below 99.60
Breakdown through the Bullish Order Block invalidates short-term bullish structure.
- Targets: 98.80 → 98.30 (liquidity zones).
- Triggers: Shutdown resolution + soft data releases resuming (showing rapid disinflation).
Upcoming USD catalysts
- Nov 6: ISM Services PMI
- Nov 8: Non-Farm Payrolls (at risk of delay)
- Nov 15: CPI (tentative, subject to BEA clearance)
- Mid-Nov: Powell remarks & FOMC Minutes – could clarify December’s path
If the shutdown persists, the absence of new data will make markets trade almost exclusively on risk sentiment and yield spreads — both currently favor the USD.
