Shutdown as a Weapon of Retaliation

EUR/USD

Key zone: 1.1500 - 1.1600

Buy: 1.1650 (on a pullback after retesting the 1.1550 level) ; target 1.1800-1.1850; StopLoss 1.1580

Sell: 1.1500 (on strong negative fundamentals) ; target 1.1350-1.1300; StopLoss 1.1570

The main reason for the ongoing risk aversion remains the American government shutdown: last week’s liquidity shortage triggered a fall in cryptocurrencies, stocks, and an irrational rise in the U.S. dollar.

On Friday, the Federal Reserve intervened and cut the SOFR rate. A statement by New York Fed President John Williams that the Fed would “soon” resume purchasing short-term U.S. Treasuries to manage reserves accelerated the dollar’s decline. Bitcoin tested a new low, while the stock market continued to fall into the weekend. The lack of details such as timing and scale of the new QE adds to uncertainty.

The shutdown has begun to cause real harm to the U.S. economy — beyond delayed wages and social benefits, a transport collapse is looming. If the government does not resume operations before Thanksgiving on November 27, a major economic disaster could unfold.

Senators are now working on a bipartisan bill to end the shutdown.

• Trump refuses to extend the Obamacare program, claiming it has increased the budget burden and worsened healthcare quality, benefiting insurance companies.
• Democrats argue that if they yield now, Trump will betray them on healthcare coverage.
• On Friday, Democrats proposed an alternative bill to extend expanded healthcare tax credits for one year in exchange for resuming government operations.
• Trump is reviewing alternative healthcare ideas, including direct payments to citizens for private insurance funded by tariff revenue. These reform ideas are still at an early discussion stage.
• Yesterday (on a non-working day!) both chambers of Congress actively sought a bipartisan compromise. It seems Trump is trying to end the shutdown soon.
• Republicans will likely issue an ultimatum: either concessions or the abolition of the filibuster (a 60-vote threshold for financial legislation).

In any case, the fact that Republicans are actively negotiating increases the chances of a compromise in the coming week.

One can only hope the Fed is ready to support markets with liquidity — and that Trump will not allow a financial collapse and subsequent recession before the 2026 midterm elections.

After the shutdown ends, a Christmas rally seems logical — but one more problem remains.

Legal experts believe there is an 80% chance the U.S. Supreme Court will rule against Trump’s tariffs introduced under “national security” grounds. The administration is preparing new tariff orders, and markets are likely to remain nervous for at least two more weeks.

So we act wisely and avoid unnecessary risks.

Profits to y’all!