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August 2023

USDX® Report

Managing U.S. dollar risk in uncertain times

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The U.S. Dollar Index ® (USDX) after reaching a 15-month low in July continued to climb as demand for the U.S. Dollar increased. The USDX closed August at 103.59, a gain of 1.90%.

  • Nonfarm Payrolls added fewer jobs than expected in July, with 187,000 new jobs created, short of the 200,000 anticipated. Disappointingly, June figures were also downwardly revised which resulted in both June and July numbers falling significantly below the average monthly gain of 271,000 recorded over the past 12 months. The USDX closed with a loss of 0.44% at 101.84.
  • Core Inflation (all items less food and energy) eased more than expected for the 12-month period ending July to 4.7% from 4.8% the prior month, the lowest rate since October 2021. The USDX closed at 102.37 with a modest gain of 0.04%.
  • FOMC minutes released confirmed the 0.25% rate rise in July which took the benchmark Federal Funds rate to the highest rate in 16 years with a range of 5.25% - 5.50%. Whilst the markets expected it was likely to be one of the last in the current cycle the Fed have not ruled out further hikes as members feared that the fight to curb inflation was far from over. The USDX closed the day at 103.32 with a gain of 0.22%.

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Macro Commentary


U.S. Dollar Index® Focus

SYMBOL: DX


Conditions:

High impact events per day

6ISM Services PMI
13Consumer Price Index
14Producer Price Index & Retail Sales
15Retail Sales
20Fed Interest Rate Decision, Fed’s Monetary Policy Statement, FOMC Economic Projections, FOMC Interest Rate Projections & FOMC Press Conference
22S&P Global Manufacturing & Services PMI PREL
28Gross Domestic Product Annualized Q2
29Core Personal Consumption Expenditures - Price Index

Weighting: EUR 57.6% / JPY 13.6% / GBP 11.9% / CAD 9.1% / SEK 4.2% & CHF 3.6% | Source: TradingView | Conditions Table: using daily SMA (10, 20, 30,50, 100, 200), EMA (10, 20, 30,50, 100, 200), Ichimoku Cloud (9, 26, 52), VWMA (20), HullMA (9), RSI (14), Stochastic (14, 3, 3), CCI (20), ADX (14, 14), Awesome Oscillator, Momentum (10), MACD (12, 26, 9), Stochastic RSI (3, 3, 14, 14), Williams %R (14), Bulls and Bears Power and Ultimate Oscillator (7,14,28) | Support & Resistance Levels: using AutoUFOs® (0.5) applied to a daily timeframe (plotted as dotted lines that represent relevant support and resistance price zones colored as follows: red = resistance levels & green = support levels)

A strong start to August trading as the demand for the U.S. Dollar increased and the U.S Dollar Index ® rallied. Even ISM Manufacturing PMI data for July, which came out slightly below expectations did not deter the bulls. On 2nd August ADP Employment Change surprised the markets with 371,000 new jobs created (revised from 324,000 previously announced), while this was below the prior month it was substantially above the 189,000 expected. The U.S Dollar Index ® closed up 0.56% for the day. The following day the U.S Dollar Index ® reached a resistance area at 102.60 - 103.28 and after disappointing ISM Services PMI data for July was released the bears returned. The bearish momentum continued throughout the majority of Friday's trading after Nonfarm Payrolls fell short of expectations and June records were downwardly revised. The U.S Dollar Index ® did find some demand as it neared the daily 20 EMA, nonetheless the market closed the day with a loss of 0.44%. The U.S Dollar Index ® closed the first week at 101.84, with a gain of 0.37%.

The following week the bulls were largely in control and the U.S Dollar Index ® traded higher although the bears returned briefly when the market reached the daily resistance area at 102.60 - 103.28 on 8th August. The U.S Dollar Index ® dropped again on 10th August after the release of softer than expected Core Inflation data. Core Inflation (all items less food and energy) cooled more than expected to 4.7% from 4.8% for the period 12-month ending July, the lowest rate since October 2021. The pace of annual inflation ticked up as Consumer Price Index (CPI) data for all items, 12-month ending July increased to 3.2%, up from 3.0% in June exceeding expectations. While the initial reaction showed weakness the demand for the U.S Dollar returned as the market tested the daily 20 EMA and ultimately closed higher. The U.S Dollar Index ® closed the week at 102.69, up 0.83%.

The following week bulls continued to drive the market higher as demand for the U.S Dollar continued. The U.S Dollar Index ® traded into the daily resistance area which had previously held firm with relative ease. The FOMC minutes released mid-week confirmed the July rate increase and showed some members had not ruled out future rate hikes as they felt the job of bringing inflation into line was far from over. On this news the bulls returned and the U.S Dollar Index ® closed the day with a gain of 0.22% at 103.32 breaching the daily resistance area. The U.S Dollar Index ® closed the week at 103.28 with a gain of 0.55%.

After the bears briefly regained control during Monday trading the U.S Dollar Index ® closed with a small loss of 0.06%, the bulls returned. The U.S Dollar Index ® traded higher for the following two consecutive days to reach a high of 103.91 where it met resistance at the upper boundary of the daily Bollinger Bands and pulled back. This was exacerbated by the release of worse than expected S&P Global Manufacturing and Services PMI data. The bulls returned on 24th August as the Jackson Hole Economic Policy Symposium began and uncertainty that interest rates had peaked led to money moving into the safe haven. This led to the largest one-day gain of the month as the U.S Dollar Index ® closed with a 0.62% gain. After a turbulent final trading day of the week the market closed neutral at 104.01. The U.S Dollar Index ® closed the week up 0.72%.

The bullish move reversed the following week when the bears returned and the U.S Dollar Index ® traded lower for three consecutive trading days, worsened by the release of ADP numbers. The ADP Employment Change for August surprised the markets when it fell short of expectations after 177,000 private sector jobs were created against the 195,000 expected and a significant drop on the upwardly revised prior months figures at 371,000. GDP preliminary data announced on the same day for Q2 fell short of expectations as the U.S. economy grew by an annualized 2.1%. The U.S Dollar Index ® closed the day with a loss of 0.37% after taking a bounce from the midpoint of the daily Bollinger Bands and converging with the daily 20 EMA. On the final trading day of the week the U.S. Dollar Index ® rallied after retesting the daily 20 SMA and 20 EMA, after Core Personal Consumption Expenditure data for July came in as expected. The U.S Dollar Index ® closed the day with a gain of 0.49%.

The U.S. Dollar Index ® closed the month at 103.59 with a gain of 1.90%.

The U.S. Dollar Index ® was in an uptrend on the daily timeframe using the daily SMA (20, 30 and 50) and daily EMA (20, 30 and 50). The weekly timeframe showed the U.S. Dollar Index ® had reverted to an uptrend based on the weekly SMA (20 and 30) and weekly EMA (20 and 30).

Source: ICE Connect

USDX® Performance


Spot RatesTicker1-Aug-2331-Aug-23Monthly Change
USD/EUREUR A0-FX1.101351.08421-1.581%
JPY/USDJPY A0-FX142.763145.524-1.897%
USD/GBPGBP A0-FX1.27941.267-0.979%
CAD/USDCAD A0-FX1.326571.35082-1.795%
SEK/USDSEK A0-FX10.601310.94869-3.173%
CHF/USDCHF A0-FX0.871680.88259-1.236%
US Dollar IndexDX A0102.303103.6191.270%
Front MonthTicker1-Aug-2331-Aug-23Monthly Change
Mini USDXSDX-ICS102.085103.5871.450%
Other ContractsTicker1-Aug-2331-Aug-23Monthly Change
Mini Brent CrudeBM-ICS84.9186.862.245%
MSCI World IndexMWL3061.82991.1-2.364%
MSCI Emerging Markets IndexMME1040.6979.3-6.260%
Mini US Dollar/Offshore Renminbi CHM-ICS7.15317.2938-1.929%

Source: ICE Connect

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