The month began with the USDX extending the bullish momentum from late April, boosted by better-than-expected ISM Manufacturing PMI. While the PMI remained in contraction territory, it surpassed forecasts, coming in at 48.7 against an expected 48. This positive surprise pushed the USDX to retest the midpoint of the daily Bollinger Bands before pulling back to finish the day with a 0.53% gain. On May 2nd, the Nonfarm Payrolls report showed an increase of 177,000 jobs, above the consensus estimate of 130,000, although below the downwardly revised total of 185,000 in March. After the announcement, the USDX rallied from its low of the day to close at 99.87, with a loss of 0.11%. However, the U.S. Dollar Index ® still ended the week higher by 0.52%.

The demand for the U.S. Dollar weakened in the early part of the following week, despite the ISM Services PMI rising to 51.6, up from the prior month's 50.8 and the expected 50.6. The USDX closed the day at 99.60, down 0.27%. The bearish sentiment persisted throughout trading on May 6th, closing with a loss of 0.57%, dipping into a daily support area at 99.17 - 98.67. On May 7th, the Federal Reserve held interest rates steady at 4.25% - 4.50%, maintaining a cautious, data-driven stance amid heightened economic uncertainty driven mainly by new U.S. trade tariffs. The statement and press conference conveyed a neutral tone, reflecting the Fed’s careful monitoring of changing economic conditions before deciding on future rate moves. The demand for the U.S. Dollar resurged, causing the USDX to burst through the midpoint of the Bollinger Bands to end the day up 0.42% at 99.73. The bullish momentum continued into the following day, and the USDX closed with a gain of 0.77% at 100.49. The index met resistance at the upper boundary of the daily Bollinger Bands, pulling back to close the final trading day of the week with a loss of 0.23%. The week ended at 100.26 with a gain of 0.39%.

Bullish sentiment returned on May 12th after the announcement of a temporary 90-day tariff relief agreement between the United States and China. Both countries agreed to significantly reduce the additional tariffs imposed on each other's goods, boosting the U.S. Dollar and the broader markets. The USDX closed up 1.00%, marking the largest daily gain of the month, and reached a resistance area at 101.57 - 103.06. The demand for the U.S. Dollar weakened after reacting to the resistance area, and the USDX dropped. These losses were extended after softer inflation data was released on May 13th, reducing the likelihood of imminent Fed rate hikes, and diminishing the U.S. Dollar’s yield advantage and appeal to investors. Annual core inflation, excluding food and energy, remained steady at 2.8% for the 12 months ending April. The Consumer Price Index for the same period eased to 2.3%, down from 2.4% in March. The USDX closed at 100.81 with a loss of 0.76%. Following mixed economic data, the USDX traded generally sideways for the remainder of the week, finding support from the daily 10-day Exponential Moving Average (EMA). On May 15th, the Producer Price Index data (excluding food and energy) came in at 3.1% year-on-year, as expected, and below the prior month's release of 4% (upwardly revised). Retail Sales fell from the prior month's release to 0.1% (albeit above expectations). On May 16th, the Michigan Consumer Sentiment Index data fell to 50.8 (later revised to 52.2). The U.S. Dollar Index ® ended the week with a gain of 0.22% at 100.84.

The following week, the USDX closed lower for three consecutive days, breaking below the midpoint of the daily Bollinger Bands and falling 1.27% before finding support. Sentiment shifted on May 22nd, as the S&P Global Manufacturing PMI rose to a preliminary 52.3 from 50.2, signaling renewed growth in factory activity, while the S&P Global Services PMI also surprised to the upside, jumping from 50.8 to 52.3. This data helped the USDX rebound, closing up 0.34% at 99.84. However, the index reversed sharply on the final trading day of the week, dropping 0.81% to close the week at 99.00, resulting in a 1.74% loss.

During the final week of May, the USDX broke below a previously held support level, finding a floor near the lower boundary of the Bollinger Bands at 98.59 before rebounding to close at 98.87, posting a slight loss of 0.09% on May 26th. The index rallied on May 27th, closing with a gain of 0.66% to end the day at 99.51. The gains were extended on May 28th, and the USDX closed up 0.36% at 99.82, buoyed by positive sentiment after the release of the FOMC minutes. However, sentiment shifted on May 29th following the release of preliminary Q1 GDP data, which showed a 0.2% annualized contraction, less severe than anticipated but still negative, causing the USDX to drop 1.01% and close at 99.28, its weakest daily performance of the month. The final trading day saw a modest recovery, bouncing from a daily support area at 99.07 - 98.59, which was nestled within a wider monthly support area at 97.74 - 95.66. The USDX closed at 99.37. Despite a 0.42% gain for the final trading week, the U.S. Dollar Index ® ended May down 0.09%, marking its fifth consecutive monthly decline.

The U.S. Dollar Index ® remained in a downtrend on the weekly chart, consistently trading below the 20, 30, and 50-period SMAs and EMAs. On the daily timeframe, the trend shifted sideways as the 10 and 20-period EMAs and SMAs converged.

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