The U.S. Dollar Index ® (USDX) opened the month at 99.81 but quickly retreated after encountering resistance between 99.81 - 100.05 on the 4-hour chart, which sat just below a daily resistance area at 100.10 - 101.12. Market sentiment was also weighed down by weaker-than-expected July Nonfarm Payrolls, which rose by 73,000 new jobs versus a consensus of 110,000, and a contraction in the ISM Manufacturing PMI to 48, announced the same day. While average hourly earnings rose by 0.3% monthly and 3.9% annually, supporting underlying wage growth, the continued contraction in the manufacturing sector dampened demand for the U.S. Dollar. The U.S. Dollar Index ® closed at 98.48 on August 1st, with a loss of 1.33%, marking the worst daily performance of the month. Following a strong end to July, recorded earlier in the week, the week ended with a gain of 1.13%.

The following week, the USDX traded sideways during the initial few days, closing with modest gains of 0.02% and 0.10% on August 4th and 5th, despite the July ISM Services PMI coming in weaker than expected at 50.1, which was below expectations and indicated contraction from the prior month. The index then declined on August 6th, dropping 0.52% to 98.02, as demand for the U.S. Dollar weakened. The bearish sentiment persisted into the following trading day and the USDX closed slightly lower, at 97.93, down 0.09%. However, on August 8th, market sentiment shifted, and the USDX rebounded. Although it met some resistance at the midpoint of the daily Bollinger Bands, the index closed 0.28% higher. Despite this late reversal, the U.S. Dollar Index ® closed the week down 0.42% at 98.09.

On August 11th, the bullish sentiment continued, and the USDX rallied above the midpoint of the daily Bollinger Bands to test a newly formed daily resistance area between 98.38 - 98.89. After reaching a high of 98.50, the USDX pulled back slightly as the bears returned, although the index ultimately closed with a gain of 0.27% at 98.35. However, the following day, demand for the U.S. Dollar weakened following the release of Annual Core Inflation data, which rose to 3.1% year-on-year for July, up from 2.9% in June. Headline CPI remained steady at 2.7%, just below expectations. Reflecting this, the USDX closed down 0.46% at 97.90. The bearish sentiment continued into August 13th, and the index traded lower, closing with a loss of 0.24%, dipping into a daily support area between 97.66 - 97.18. After finding support, the sentiment reversed on August 14th, and the demand for the U.S. Dollar strengthened. This upward momentum was extended further after the Producer Price Index jumped to 3.7% in July from 2.6% in June, surprising the markets. The USDX rebounded to close at 98.06, with a gain of 0.49%. On the final trading day of the week, after testing the 30-day EMA, the USDX encountered resistance and closed with a loss of 0.35%, despite Retail Sales data figures meeting expectations. The U.S. Dollar Index ® closed the week at 97.71, with a loss of 0.39%, locked between an area of support below (97.66 - 97.18) and the midpoint of the Bollinger Bands with a resistance area (98.38 - 98.89) just above.

The following week, the USDX retested the daily support area, which held, and the USDX traded higher for two consecutive days. The index met resistance at the midpoint of the daily Bollinger Bands on August 20th and pulled back slightly after the release of the FOMC minutes. The minutes revealed officials chose to hold interest rates steady at 4.25% - 4.50%, citing economic uncertainty and a split in policymakers' concerns between those worried more about stubborn inflation exacerbated by tariffs and those concerned about job market weakness. The USDX closed marginally lower on the day at 98.16, with a 0.04% loss. The USDX recovered the following day as demand for the U.S. Dollar returned, and the index closed higher with a gain of 0.43% at 98.54, trading back inside the daily resistance area. Sentiment reversed on August 22nd and the USDX dropped rapidly from this area, the bearish momentum driven by the Federal Reserve Chair Jerome Powell's speech at the Jackson Hole Symposium after Powell signaled the possibility of upcoming rate cuts. This dovish tone, combined with concerns over economic growth and inflation, spurred a sharp sell-off in the USDX as traders priced in looser monetary policy ahead. However, Powell also maintained that the Fed would remain data-dependent and committed to its inflation goals, signaling caution. The USDX closed down 0.91% at 97.61. Despite the significant weakness on the last trading day of the week, the U.S. Dollar Index ® closed the week with a modest loss of 0.08% back into the daily support area.

The Jackson Hole Symposium continued over the weekend with additional developments issued following the August 22nd announcement. On August 25th, market focus shifted to Powell’s firm commitment to controlling inflation and the Fed’s readiness to adjust policy if needed, reinforcing the view that rate cuts were not guaranteed and that tightening could continue. This boosted demand for the U.S. Dollar, and the USDX rallied from the support area to close at 98.35 with a gain of 0.79%, marking the strongest daily performance of the month. The next day, the USDX reached a high of 98.46, driven by demand and retested the daily resistance area at 98.38 - 98.89 before retreating to close lower at 98.14, with a loss of 0.25%. On August 27th the demand for the U.S. Dollar initially strengthened and the USDX rallied to reach a high of 98.64 before closing down 0.09% at 98.09. On August 28th, despite preliminary Q2 Gross Domestic Product (GDP) annualized data exceeding expectations, showing an annualized growth rate of 3.3%, an increase on previous expectations, the USDX closed lower, down 0.28% at 97.78. The month ended on August 29th, with continued U.S. Dollar weakness, closing down 0.20% on the final trading day, despite this the USDX closed the week with a 0.21% gain. The U.S. Dollar Index ® closed the month at 97.78, down 2.02%. The U.S. Dollar Index ® remained in a downtrend on the weekly chart and transitioned to sideways on the daily timeframe, locked between the daily support and resistance areas and threading through the 20 and 30 EMAs.

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