The EUR/USD pair closed Friday's trading at 1.1538. For the three previous weeks, the pair oscillated within the range of 1.1560-1.1730, and last week was no exception – until Wednesday, the price showed an upward trend, reaching 1.1670, but then the initiative was seized by sellers. Against the backdrop of the overall strengthening of the dollar, USD bears returned to the 15th figure area and, at the end of the American trading session, managed to push through the support level of 1.1560 (the lower line of the Bollinger Bands indicator on the D1 timeframe).

Traders' attention was focused on three major events of the week. First, the FOMC meeting; second, the European Central Bank meeting; and third, the meeting between Donald Trump and Xi Jinping. Traders in EUR/USD reacted differently to each event but the overall result favored the American currency.

The Federal Reserve became the dollar's key ally, implementing a "hawkish pause" at the conclusion of its October meeting. By lowering the interest rate by 25 basis points, the central bank cast doubt on a potential cut in December, lamenting the absence of official macro data and general uncertainty. Additionally, according to Jerome Powell, more of his colleagues are leaning toward taking a pause "for at least one meeting" before the next round of cuts. Following the October meeting, other Fed representatives (Raphael Bostic, Beth Hammack) supported Powell's position, stating that a rate cut in December "is by no means a foregone conclusion." Such cautious wording did not sit well with EUR/USD buyers, although the pair did not immediately reverse downwards.

Essentially, any results from the October meeting that do not contain direct hints toward further easing would be perceived by the market as a "hawkish pause," given the unjustifiably strong "dovish" expectations. Before the meeting, the probability of a rate cut at the December meeting was estimated at 95%, according to CME FedWatch tool data. It is not surprising that the Fed did not meet these "expectations," taking a cautious stance amid the ongoing shutdown.

By the end of the week, dovish expectations weakened significantly. The market has begun to doubt that the Fed will resort to cutting rates again this year. The probability of a dovish scenario at the December meeting is now estimated at just 60%.

Interestingly, if the market had initially priced in such a probability (50-60%), the dollar would hardly have benefited from the October meeting. After all, the Fed was, de facto, doubtful about the prospects for a December cut not due to macroeconomic signals but because of the absence of such signals. Due to the continuing shutdown, macroeconomic statistics are not being published (except for CPI), and the Fed must act blindly. In conditions of an information vacuum, the central bank could not afford to announce a possible rate cut in December.

However, the shutdown is inherently temporary. Suppose that tomorrow or the day after (within a week or month), congressmen finally agree on a budget, and the BLS begins operating at full capacity, publishing official statistics. This raises the question: will the Fed maintain its moderately hawkish stance if the published Non-Farm Payrolls reflect a catastrophic employment situation? This is by no means a rhetorical question.

In other words, the dollar has strengthened its position on very shaky ground. Once the shutdown ends, the situation could change dramatically, especially after the publication of NFP for September and October. Judging by the latest statements from Donald Trump, this could happen in the near future, as the White House intends to resolve the shutdown issue in a quite radical way.

As of today, the Senate is in a stalemate. The Republican Party holds 53 seats in the upper chamber, while 60 votes are needed to overcome a filibuster (a prolonged debate intended to block voting). Following 13 rounds of voting, neither of the two bills under consideration has gained support.

Yesterday, Trump suggested that Republicans take a different approach – apply the "nuclear option," which means bypassing the filibuster using the XX rule for conducting meetings in the Senate. Similar precedents have occurred; for instance, in 2013, Democrats resorted to this scheme to allow the confirmation of federal judges (except for the Supreme Court) and executive nominees by a simple majority.

Essentially, the "nuclear option" is a procedural maneuver initiated by one of the senators (typically the majority leader) when he raises the question of applying a simple majority instead of 60 votes (to end the debate phase). The Senate then approves this by a simple majority through an appeal to the presiding officer's decision. As a result, a new precedent is created that alters the interpretation of the rule, allowing the application of a simple majority for a specific type of voting without formally changing the procedural rules.

However, it is not guaranteed that senators will support Trump's proposal (theoretically, Republicans could have applied the "nuclear option" back in October), given the "side effects." In particular, some senators believe that protecting the minority is a fundamental element of the Senate institution. This view is held not only by Democrats but also by some Republicans, who might find themselves in the minority after the upcoming midterm elections.

Nevertheless, it must be reiterated: the shutdown is inherently a temporary phenomenon. It can be assumed that it will conclude in November, meaning that the U.S. Bureau of Labor Statistics will return to its normal operational mode. The Fed's "wait-and-see" position is primarily influenced by the absence of official reports, rather than the macroeconomic situation. This is an important point that I believe the market is underestimating. If employment in September/October turns out to be negative (which is quite likely, considering the September ADP report), the likelihood of a Fed rate cut in December could soar back to 80-95%, putting pressure on the dollar again.

Thus, the downward momentum of EUR/USD "in the moment" was justified – the Fed turned out not to be as "dovish" as the majority of market participants expected. However, given the reasons for the Fed's caution, the question arises: can sellers overcome the next support level of 1.1530 (the lower line of the Bollinger Bands indicator on the W1 timeframe)? If the southern momentum fades in this price area, longs will again come into priority – with the already familiar targets of 1.1600 and 1.1630 (the Tenkan-sen line and the middle line of the Bollinger Bands on D1, respectively).