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USDX® Report

January 2025

Managing U.S. dollar risk in uncertain times

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The U.S. Dollar Index® (USDX) retreated from the January high of 110.02 to end the month at 108.35 with a small gain of 0.02% as the demand for the U.S. Dollar softened throughout January 2025. Mixed economic data, the Federal Reserve's stance on interest rates and uncertainties throughout January surrounding the Trump administration's economic policies, particularly regarding the introduction of new tariffs, dampened U.S. Dollar demand.

  • Nonfarm Payrolls (NFP) for December exceeded market expectations, after announcing an increase of 256,000 new jobs compared to the anticipated 160,000 and November's downwardly revised total of 212,000 (initially reported as 227,000). The unemployment rate edged lower to 4.1%, and annual wage inflation fell slightly to 3.9%. The USDX closed at 106.04, with a gain of 0.42%.
  • Annual Core Inflation, excluding food and energy, decreased to 3.2% for the 12-month period ending December 2024, falling below market expectations of 3.3%. In addition, the Consumer Price Index (CPI) increased as expected to 2.9% from 2.7% the previous month. Following these mixed-inflation reports, the USDX closed the day with a loss of 0.15% at 108.92.
  • The Federal Reserve kept the federal funds rate steady at the 4.25% - 4.50% range during its January 2025 meeting in line with market expectations pausing its recent rate-cutting cycle which totaled a 1 percentage point reduction since September 2024. Following the announcement, the USDX closed higher with a modest gain of 0.07% at 107.81.

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Macro Commentary


U.S. Dollar Index® Focus

SYMBOL: DX


Conditions:

High impact events per day

12Consumer Price Index
13Producer Price Index
14
Retail Sales & Michigan Consumer Sentiment Index PREL
19FOMC Minutes
24
S&P Global Manufacturing PMI (PREL) & S&P Global Services PMI (PREL)
27Gross Domestic Product (GDP) Annualized Q4 PREL
28Core 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)

The U.S. Dollar Index ® (USDX) began January 2025 with a strong performance, closing at 109.21 on the first trading day, marking a 0.81% gain and the month's strongest single-day increase. This rally drove the USDX beyond the upper boundary of the Bollinger Bands. However, the rally reversed the following day, despite the release of better-than-expected ISM Manufacturing PMI data. The data indicated the manufacturing sector, while still in contraction, showed improvement, with the index rising to 49.3 in December from 48.5 in November, meeting forecasts and indicating a softer decline in manufacturing activity. By the end of the first week of January, the U.S. Dollar Index ® closed at 108.80 with a gain of 0.93%.

The following week, the USDX declined significantly on January 6th as bearish sentiment took hold after news that Trump aides were exploring a tariff plan that would only cover critical imports, rather than the broad tariffs initially feared. The demand for the U.S. Dollar weakened until support was found at the daily 20 EMA where buyers stepped in causing a slight uplift although ultimately the USDX closed the day down 0.62%. After retesting the 20 EMA on January 7th, the USDX reversed its initial decline and closed higher throughout the remainder of the week. ISM Services PMI data announced a continued expansion in the service sector as it rose to 54.1, exceeding market expectations, which aided the bullish return. The following day, ADP Employment Change for December came in lower than expected at 122,000 new jobs, against the anticipated 140,000 and 146,000 from the previous month. The USDX strengthened later in the day after the release of the Federal Open Market Committee (FOMC) minutes. The minutes revealed a cautious approach to rate cuts with persistent inflation concerns, and potential policy impacts which signaled a more hawkish Fed stance that supported the U.S. Dollar appreciation. The USDX closed the day with a gain of 0.39% at 108.93. The bullish sentiment continued, driven by the release of strong Nonfarm Payrolls data on January 10th. December saw the creation of 256,000 new jobs, which significantly surpassed expectations (160,000) and the downwardly revised 212,000 from November. Additionally, Average Hourly Earnings for December rose by 0.3% month-on-month, slightly lower than November's increase, while year-on-year earnings decreased to 3.9% from the prior month. After testing the upper boundary of the daily Bollinger Bands, the USDX reached a daily resistance area at 109.54 - 110.8 and pulled back although it still closed the day with a 0.42% gain. The U.S. Dollar Index ® closed the week at 109.49 posting a gain of 0.65% for the week.

On January 13th, the USDX rallied to a monthly high of 110.02, retesting the daily resistance area before the bears regained control and the index fell. Despite this late pullback the USDX closed up to post a gain of 0.29% at 109.81. The following day the demand for the U.S. Dollar continued to weaken further after the release of the Producer Price Index (PPI) excluding food & energy report. The data came in below expectations at 3.5%, matching the upwardly revised November figure. The USDX closed the day with a 0.29% loss, at 109.11. On January 15th, the Annual Core Inflation data, excluding food and energy, was released, showing a decrease to 3.2%, below the anticipated 3.3%. Concurrently, the broader Consumer Price Index (CPI) increased to 2.9% from the previous month's 2.7%. The inflation report highlighted a rebound in energy prices, moderate food cost increases, and decelerating but still significant shelter expenses contributing to overall inflation. This mixed inflation picture suggested persistent challenges for the Federal Reserve's monetary policy. The U.S. Dollar Index ® recovered some of its earlier losses following the inflation data release. However, it ultimately closed the day down 0.15% at 108.92. On January 16th, downward pressure persisted, although mildly, following the release of December Retail Sales data. The report revealed a 0.4% month-on-month increase, underperforming against the anticipated 0.6% growth. The week ended on a more positive note after the USDX closed with a 0.38% gain on January 17th. Despite this late gain, the USDX closed the week at 109.20, with a loss of 0.26% putting an end to the prior six weeks of weekly gains.

The week of January 20th, saw significant volatility for the U.S. Dollar Index ®, marking its worst weekly performance since November 2023. The USDX declined sharply, broke through the midpoint of the daily Bollinger Bands and tested the lower band by the end of the week. This bearish sentiment was largely driven by developments in US-China relations following President Trump's second inauguration on January 20th. President Donald Trump and Chinese President Xi Jinping held a conversation which sparked hope for easing tensions between the two nations and Trump announced a delayed enforcement of TikTok restrictions. In addition, expectations of lower tariffs (at the time) than previously feared, reduced concerns about inflation and Trump's call for the Federal Reserve to cut interest rates increased investor appetite for riskier assets, reducing demand for the U.S. Dollar as a safe-haven currency. The week ended with the S&P Global Manufacturing PMI for January coming in at 50.1, surpassing expectations and indicating a slight expansion in the manufacturing sector. However, the S&P Global Services PMI for January registered a slight slowdown as the index recorded 52.8, falling short of the anticipated 56.5 and December's 56.8. The U.S. Dollar Index ® ended the week down 1.82%.

On January 27th, the bearish sentiment continued until the USDX reached a support area at 106.89 - 106.40 before lifting slightly, to close at 107.16, down 0.18%. The following day the market gapped up and closed higher at 107.68 with a gain of 0.12%. The Federal Reserve announced its decision on January 29th, to hold interest rates steady at 4.25% - 4.50%. The Fed's less confident view on inflation and a more cautious approach to future rate reductions led to increased demand for the U.S. Dollar. Consequently, the USDX closed up 0.07%. On January 30th, the release of Q4 2024 GDP data showed the U.S. economy grew at an annualized rate of 2.3%, lower than the previous quarter's 3.1% but still indicated a steady growth. The week ended with Core Personal Consumption Expenditures (PCE) Price Index data for December, released on January 31st. The announcement met expectations with a 0.2% month-on-month increase and a steady 2.8% year-on-year rate. The U.S. Dollar Index ® closed near the midpoint of the daily Bollinger Bands after gaining 0.93% throughout the week. The U.S. Dollar Index ® ended January at 108.35 with a modest gain of 0.02%.

The U.S. Dollar Index ® maintained its uptrend during January on the weekly timeframe trading above the weekly SMA & EMA 20, 30 and 50. However, the daily chart painted a more complex picture, especially during the final two weeks of the month. The EMA 20 and 30 moved sideways through the price action, indicating a lack of clear directional momentum. While the USDX traded below the 20 and 30 SMA which indicated a short-term downtrend.

Source: ICE Connect

USDX® Performance


Spot RatesTICKER1-Jan-2531-Jan-25Monthly Change*
USD/EUREUR A0-FX1.03521.035770.055%
JPY/USDJPY A0-FX157.247155.1811.331%
USD/GBPGBP A0-FX1.25091.2392-0.944%
CAD/USDCAD A0-FX1.43831.4524-0.971%
SEK/USDSEK A0-FX11.149111.098290.458%
CHF/USDCHF A0-FX0.90580.91084-0.553%
US Dollar IndexDX A0109.394108.37-0.945%
Front MonthTicker1-Jan-2531-Jan-25Monthly Change
Mini USDXSDX-ICS109.209108.217-0.917%
OTHER CONTRACTSTICKER2-Jan-2531-Jan-25Monthly Change
Brent CrudeBM-ICS75.9375.67-0.344%
MSCI World IndexMWL3725.23847.93.189%
MSCI Emerging Markets IndexMME1071.81090.41.706%
Mini US Dollar/Offshore RenminbiCHM-ICS7.32627.29320.452%

Source: ICE Connect

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