How to Trade a Potential Government Shutdown

Sep 27, 2023

The U.S. dollar could come under a lot of pressure.

Not only do countries around the world want to dethrone the U.S. dollar, including China and Russia, a U.S. government shutdown could cut the dollar rally short, too. Granted, a potential shutdown could be short-lived, but it could still have a negative impact on the dollar.

That’s because, according to MarketWatch, “The shutdown could eventually result in a delay of key inflation data, which will be an essential figure for Fed policy makers as they weigh whether to deliver another rate increase. If the Fed doesn’t get the inflation data they need to make a policy decision, they will likely keep rates on hold, which could be dollar negative.”

FXStreet added, “Recent history suggests the U.S. dollar index (DXY) could fall by around 1%-1.5% in the several weeks following the start of the shutdown.” We also have to consider the U.S. dollar is technically overbought at this point, too.

Should we see a government shutdown, and a potential pivot in the U.S. dollar, one way to trade weakness is by investing in the Invesco DB US Dollar Index Bearish Fund (UDN). This one, of course, rises when the dollar plunges.

And, should the overvalued dollar sink, gold prices should push aggressively higher, too. Last checked, gold was down another $16.41 on the day. Not only could we trade gold ETFs, but also gold stocks, such as Newmont (NEM) and Barrick Gold (GOLD) – both of which are oversold.

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