US-China trade and the government shutdown cast multiple uncertainties over the market
Market sentiment started the week cautiously, driven by the dual impact of escalating US-China trade tensions and the ongoing US government shutdown. Last Friday, the Trump administration announced plans to impose a 100% tariff on Chinese imports, effective November 1st, escalating the trade dispute between the two largest economies. Beijing criticized the move and warned it would take “corresponding measures” to safeguard its interests. This trade friction dampened risk sentiment and boosted demand for safe-haven assets like gold.
Furthermore, the ongoing US government shutdown has added uncertainty to the market. With the Senate not set to resume session until Tuesday, significant progress is unlikely early this week. This has delayed key economic data, such as the CPI inflation report originally scheduled for October 15, until October 24. This could increase market volatility in the absence of macroeconomic indicators.
Gold and US dollar technical analysis
Gold: Can it reach new highs?
XAU/USD, 4-hour chart | Source: Ultima Markets MT5
$4,059 last week, gold briefly pulled back. However, amidst escalating trade and geopolitical risks, gold prices quickly stabilized and resumed their upward trend. Technically, the $4,000 to $3,995 range currently represents key support. As long as gold prices can hold above this range, the bullish structure remains intact and could potentially challenge all-time highs again.
USDX daily chart | Source: Ultima Markets MT5
Despite a significant pullback last week, the US Dollar Index (USDX) remains firmly above the breakout zone of 98.50 , maintaining its recent upward momentum. However, if trade uncertainty and the government shutdown persist, the dollar’s upward momentum may be limited, and short-term volatility is expected to increase. The dollar’s performance this week is expected to be primarily driven by risk sentiment.
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Author：Joshen Stephen｜Senior Market Analyst at Ultima Markets
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