US Dollar | June 2022 MONTHLY Report by TRADDICTIV

US Dollar | June 2022 MONTHLY Report - www.tradewithufos.com

US Dollar -

The U.S. Dollar Index ® (USDX) closed the month at 104.46 with a gain of 2.65%, after reaching a high at 105.57 on the 15th June, the strongest the USDX had traded in two decades.

• Nonfarm Payrolls data released on 3rd June reported 390,000 new jobs were created during May, this welcomed news exceeded expectations of 325,000. Overall, it resulted in a positive day of trading as the USDX closed at 102.16 with a gain of 0.37%.
• Consumer Price Index (CPI) data for all items released on 10th June showed an unexpected jump as inflation data rose to 8.6%, the highest level since December 1981 before seasonal adjustments for the 12-month period ending May, accelerated by the rapid rise in energy and food costs. Prices for all items less food and energy recorded a 6.0% increase over the last 12 months, slowing for a second consecutive month. The USDX closed the day at 104.15 with a gain of 0.82%.
• The Federal Reserve announced a 75 basis point interest hike to help curb soaring inflation as it continued to run at a four-decade year high. This aggressive move was the highest increase seen since 1994 and further aggressive rises are likely to be announced at the July meeting. Concerns grow, as this monetary policy tightening will likely have a wider negative impact on the U.S. economy as growing costs continue to bite.

DAILY TREND: UP

INDEX WEIGHTING:

EUR 57.6% | JPY 13.6% | GBP 11.9% | CAD 9.1% | SEK 4.2% | CHF 3.6%

Source: ICE Connect

June trading started with a strong first day performance in the U.S. Dollar Index ®. The market surged during the U.S. session as the bulls established control as money flowed into the safe haven currency. This aided the recovery of some of the losses made during the final week of May trading.

Positive ISM Manufacturing PMI data for May released on 1st June saw figures published at 56.1 which came out above expectations of 54.5 and April data released at 55.4. This was welcomed news although year to date manufacturing growth shows a steady downward trend. The demand for the U.S. Dollar continued throughout the day as the bulls drove the U.S. Dollar Index ® higher to close the day with a gain of 0.75% at 102.53 the highest close the U.S. Dollar Index ® had seen over the previous seven trading days.

It was at the high of the day, 102.75 on 1st June the U.S. Dollar Index ® met some resistance as the market reached a pocket of selling pressure at 102.57 - 102.79 (4-hour timeframe), backed up with a daily resistance area just above at 102.81 - 103.30. This caused the U.S. Dollar Index ® to pull back from the high. The decline continued as weakness crept into the U.S. Dollar and the bears established control during the European session. The drop exacerbated further as ADP Employment Change data for May released disappointing numbers with 128,000 new jobs created against April revised figures of 202,000 (previously 247,000) and significantly below expectations of 300,000. This bearish momentum continued throughout the day and the U.S. Dollar Index ® closed 2nd June trading down at 101.83, a loss of 0.75% almost eradicating the prior day’s gains.

The U.S. Dollar Index ® recovered some of the prior day losses on 3rd June aided by positive Nonfarm Payrolls data for May that announced 390,000 new jobs created against expectations of 325,000. In addition, there was an uplift to April’s published figures with 436,000 jobs created against previous recorded figures of 428,000. This was good news as concerns loom around a possible economic slowdown and surging levels of inflation. Other highlights were the unemployment rate remained steady at 3.6%, just above the lowest rate last seen in 1969 and average hourly earnings rose during May albeit slightly lower than expected.

Even the negative news for May ISM Services PMI data released later that day at 55.9 which showed a further decline based on the prior month's release at 57.1 and below expectations of 56.4 did not dampen the bullish direction on the U.S. Dollar. The U.S. Dollar Index ® closed the day up by 0.37% at 102.16.

The first week of June trading the U.S. Dollar Index ® closed 102.16 a gain of 0.48%, the first gain in three weeks.

After a bearish start to trading on 6th June, the U.S. Dollar found support near Friday's low. The U.S. Dollar Index ® rose as risk appetite faltered and the U.S. Dollar bulls returned lured by the appeal of the safe haven nature of the U.S. Dollar. The U.S. Dollar Index ® rallied throughout trading with the bulls firmly in control to close the day out bullish at 102.45 with a gain of 0.21%.

Tuesday 7th June trading, the U.S. Dollar Index ® continued the positive momentum seen during the prior day as the bulls drove the market higher. The U.S. Dollar Index ® reached the daily resistance area at 102.81 - 103.30 which it just fell short of earlier in the month where sellers were waiting. With the bears in control the U.S. Dollar Index ® declined from the high of 102.85, which also coincided with Treasury Secretary Janet Yellen’s speech to the Senate Finance Committee. The speech focused on inflation being elevated and highlighted the need to utilise the appropriate budgetary stance whilst complementing the actions that the Federal Reserve are taking to help curb inflation through monetary policy. A balancing act will be needed in order not to undermine the economy. The U.S. Dollar Index ® closed the day down at 102.32 with a loss of 0.15%.

Fortunes reversed during early trading on 8th June as the U.S. Dollar found some strength and recovered some of the losses made after the previous day's drop. The bulls drove the market higher and the U.S. Dollar Index ® just fell short of the daily resistance area at 102.81 - 103.30 that dominated the market direction the prior day as selling pressure came in. The U.S. Dollar Index ® dropped from a high of 102.78 as the bears regained control throughout early trading in the US session. The bearish move faltered when the market reached a small pocket of support formed on a low timeframe with a range of 102.33 - 102.26 incorporating the low of the day on 7th June, here buyers were waiting and the U.S. Dollar Index ® took a bounce. The market rallied to close the day up at 102.55, a gain of 0.14%.

On 9th June the U.S. Dollar Index ® struggled to reach the prior day high during early trading and the market dropped to retest the prior day low and in doing so revisited the pocket of support created on 7th June 102.33 – 102.26 which eventually broke on a further retest. The U.S. Dollar Index ® found some support lower down which propelled the market upwards, the strong move aided by the selloff in U.S. stocks, which sent investors into the U.S. Dollar as a safe haven. The U.S. Dollar Index ® rallied throughout the remainder of the day to challenge the previously tested daily resistance area at 102.77 - 103.27 piercing through the upper boundary of the Bollinger Bands on a 4-hour chart, breaking through the daily 20 SMA before pulling back slightly to close the day with a gain of 0.61% at 103.22.

On 10th June the strong bullish momentum continued throughout the trading day. Positive news was announced in relation to Core inflation figures (all-items less food and energy) which published an increase of 6.0% (12-month ending May) showing a slowdown compared to 12-month ending April data at 6.2% and March at 6.5% which was welcomed news. This however was against the backdrop of the Consumer Price Index data for all items which unexpectedly rose to 8.6% for 12-month ending May, the highest rate since December 1981 and above market expectations of 8.3%. This increase was driven by energy prices that rose by 34.6% and food costs leapt up 10.1%, the largest increase since March 1981.

As inflation remains one of the key priorities, to help gauge future inflation expectations ICE Benchmark Administration has launched the ICE U.S. Dollar Information Expectation Index Family. A useful tool to help answer some of the key questions that will affect how the monetary policy will unfold within the coming quarters

Michigan Consumer Sentiment data released on 10th June had little impact on the U.S. Dollar Index ® once the bulls took control and even the negative data released 50.0 (revised down from the initial release of 50.2) against expectations of 58.0 and the prior release at 58.4 did not entice the bears back. The U.S. Dollar Index ® closed the day 104.15, a gain of 0.82%.

The second week of June trading the U.S. Dollar Index ® closed with a gain of 1.88% at 104.15.

The bullish momentum continued into the third week of trading on the U.S. Dollar Index ®. Monday 13thJune had a strong performance with the bulls firmly in control. The high demand for the U.S. Dollar saw the U.S. Dollar Index ® blast through the resistance areas on the lower timeframes. The move was so strong the market sliced through a higher daily area of resistance which was untested at 104.50 – 105.07 to consume any residual sell orders in its path to break through the upper boundary of the daily Bollinger Bands before pulling back slightly from a high of 105.15. The U.S. Dollar Index ® closed the day at 104.97 with a gain of 0.83%, the largest one-day gain in June.

The U.S. Dollar bulls drove the market higher on 14th June and with this momentum, the U.S. Dollar Index ® found itself higher within a monthly area of resistance with a wider range of 104.12 – 109.75. The wider area is formed with multiple resistance areas nested within from the weekly and daily timeframes. The first daily resistance area with a range of 104.50 – 105.07 was reached on 13th June which created a slight pull back towards the end of the trading day although the bears returned with more vigor on 14th June during the Asian trading session and the market dropped. The U.S. Dollar Index ® took a brief pause as it reached a small pocket of support on a 2-hour chart to create the low of the day before rallying to break through the upper boundary of this resistance area, the highest the U.S. Dollar Index ® had traded since December 2002. The U.S. Dollar Index ® closed the day at 105.34 remaining above the upper boundary of the daily Bollinger Bands with a gain of 0.32%.

On 15th June the U.S. Dollar bears returned during the Asian session and the market dropped although it failed to break the small pocket of support previously tested and the U.S. Dollar Index ® rallied. Retail Sales data published poor reading for the U.S. economy with May month on month data recording a drop in sales into negative territory at -0.3% against an expected rise of 0.2% and April published data at 0.7% (downwardly revised from 0.9%). Undeterred by this news the U.S. Dollar Index ® broke through the upper boundary to reach a high of 105.57 where sellers drove the market lower.

The Federal Open Market Committee met on 15th June to review overall economic activity as concerns around inflation remain even with the U.S. announcing strong jobs data in real terms wages are shrinking. Janet Yellen’s testament to the Senate Finance Committee earlier this month confirmed the Fed is pursuing the need to bring inflation inline using the appropriate monetary policy which was reiterated by Fed chair Jerome Powell as inflation remains one of the Fed's top priorities and has caused a surprise to the upside over the past year.

The Fed announced an increase in interest rates by 75 basis points, a surprise leap compared to the expected hike of 50 basis points. This aggressive move demonstrated the willingness to tackle inflation head on to bring it down from the 40-year highs whilst avoiding causing a recession; this was the largest increase in interest rates since 1994. The Fed also did not rule out that similar rate hikes could be announced at the July meeting.

The U.S. Dollar Index ® reached a high of 105.57 creating a fresh two-decade high before closing the day at 104.93 a loss of 0.19%.

As inflation is set to play a key role in interest rate decisions throughout 2022, the ICE U.S. Dollar Information Expectation Index Family is a great tool to help plan for the future. The chart below provides the historical Index setting over the past year:

Further information can be found on the ICE U.S. Dollar Inflation Expectations Index Family: https://www.ice.com/iba/usd-inflation-indexes

On 16th June, the selling pressure mounted as the bears continued to show their dominance in the market after the U.S. Dollar Index ® met resistance at the high during the prior trading day. The market reached a high in the European session at 105.28, tested the upper band of the daily Bollinger Bands and dropped, the bearish momentum continued throughout most of the day until the market reached a small pocket of support where buyers waited at 103.24 - 103.06 on a 4-hour chart the market took a small bounce upward. The U.S. Dollar Index ® closed down at 103.42, a loss of 1.13%, the largest one-day drop recorded for June.

Trading on 17th June was largely positive with the bulls regaining control. Fed Chair Powell testified before Congress and reiterated the Feds position to bring down the soaring inflation rate in line with the longer-term 2% policy objective. Powell stated that rates would continue to be raised in order to help meet the target. The U.S. Dollar Index ® closed an inside day at 104.49 with a gain of 0.77%.

The U.S. Dollar Index ® closed the week at 104.49 with a gain of 0.37% for a third consecutive weekly positive close.

Trading on 20th June was lackluster as the U.S. Dollar Index ® failed to reach the high or low of the prior day and closed within a tight trading range, slightly down for the day at 104.49, a loss of 0.01%. The 20th June was a federal holiday ‘Juneteenth’ where banks and markets were closed.

21st June another low volatility day with the U.S. Dollar Index ® closing 104.21, a loss of 0.03%. This continued to be the theme throughout the remainder of the week as the U.S. Dollar Index ® moved sideways, edging down slowly to close down on 22nd June at 103.98 with a loss of 0.22%.

23rd June was the only positive trading day for the week when the U.S. Dollar Index ® closed up by 0.18% at 104.19.

The final day of the week ended with the U.S. Dollar Index ® at 103.96 with a loss of 0.19%. Whilst the agenda was busy throughout the week with speeches from the Fed Chair Jerome Powell, appetite for the U.S. Dollar waned as money moved away from the safe-haven currency. Jerome Powell’s speeches did not give anything away that was not already factored into the market.

The U.S. Dollar Index ® closed the week at 103.96 with a loss 0.52%.

Trading on 27th June the U.S. Dollar Index ® was mixed and although the bulls tried to drive the market higher in early trading the bears regained control and the market dropped. Above estimated Durable Goods Orders for May, came out at 0.7% against expectations at 0.1% although this did not help to entice the bulls back. It was not until the U.S. Dollar Index ® tested the mid-point of the daily Bollinger Bands where support was evident. It was at the daily 20 SMA when the bulls returned sending the market higher to recover some of the losses made earlier in the day. The U.S. Dollar Index ® closed at 103.68, down 0.18%.

On 28th June, the mid-point of the daily Bollinger Bands provided some support as the U.S. Dollar Index ® bears tried to push the market lower. After rejecting lower prices the U.S. Dollar Index ® rebounded with the bulls sending the market higher to close the day with a strong performance at 104.26, a gain of 0.54%.

This bullish momentum continued throughout the majority of trading during the 29th June as the U.S. Dollar Index ® continued to rally. Gross Domestic Product data published showed Annualized GDP for Quarter 1 was in negative territory at -1.6%, although this was disappointing news indicating a contraction, this was not far off the preliminary indication for Quarter 1 announced in May therefore resulted in little market reaction. The U.S. Dollar Index ® continued its upward move to close up for the day at 104.85 with a gain of 0.56%.

Early trading on 30th June saw the U.S. Dollar bulls drive the market higher encouraged by safe-haven flows, although as price approached 15th June highs resistance was evident and the bears stepped in sending the U.S. Dollar Index ® lower for the remainder of the day. The U.S. Dollar Index ® closed at 104.46 with a loss of 0.35%.

The uptrend in the U.S. Dollar Index ® on the daily timeframe has resumed as the trend continues to remain up on the weekly timeframe. The U.S. Dollar Index ® closed the month of June at 104.46 with a gain of 2.65%.

UPCOMING HIGH IMPACT EVENTS

• Fri 1 Jul ISM Manufacturing PMI (Jun)
• Wed 6 Jul ISM Services PMI (Jun)
• Wed 6 Jul FOMC Minutes
• Thr 7 Jul ADP Employment Change (Jun)
• Fri 8 Jul Nonfarm Payrolls (Jun)
• Wed 13 Jul CPI (Jun)
• Fri 15 Jul Retail Sales (Jun)
• Fri 15 Jul Michigan Consumer Sentiment (Jul) PREL
• Wed 27 Jul Durable Goods Order (Jun)
• Wed 27 Jul Nondefense Capital Goods Orders ex. Aircraft (Jun)
• Wed 27 Jul Fed Interest Rate Decision
• Wed 27 Jul Fed’s Monetary Policy Statement
• Wed 27 Jul FOMC Press Conference
• Tue 28 Jul Gross Domestic Product Annualized (Q2) PREL

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