To The Moon

Source: ICE Connect, ~30 Days

US Dollar -

The U.S. Dollar Index ® (USDX) lost almost 5.00% of its value in November to close at 105.90, the largest monthly loss since 2010.

• The Federal Reserve raised rates by 75 basis points at the meeting held on 2nd November bringing the Federal Funds rate to a target range of 3.75% - 4.00%, its highest level since March 2008. The USDX closed the day at 111.23 with a loss of 0.12%.
• Nonfarm Payrolls data released showed 284,000 new jobs were created during October (revised from 261,000) to exceed expectations of 200,000. Whilst this was positive, it represented a decline compared to the prior month after September came in with an increase of 315,000 new jobs (revised upwards from 263,000). The USDX closed the day at 110.77 with a loss of 1.86%.
• Core Inflation (all items less food and energy) took an unexpected fall to record an increase over the last 12-months at 6.3%, down from 6.6%, in September. The USDX closed the day at 108.09 with a loss of 1.92%.

DAILY TREND: DOWN

INDEX WEIGHTING:

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

Source: ICE Connect

After a bullish end to October, weakness came into the market as the U.S. Dollar Index ® began trading in the Asian and European sessions on 1st November.

The bearish momentum reversed in the early part of the U.S. session even though ISM Manufacturing PMI data for October was released 1st November showed manufacturing output continued to slowdown. The data came out at 50.2, which was slightly above expectations (50.0) although fell short of September's release at 50.9.

The demand for the U.S. Dollar continued (which coincided with a test of the midpoint of the 4-hour Bollinger Bands) to claw back most of the earlier losses. The U.S. Dollar Index ® closed the day at 111.36 with a loss of 0.07%.

The 2nd November started with little movement during early trading as the market eagerly awaited the Fed announcement. First up for the day was ADP Employment Change. Figures released showed private sector jobs increased by 239,000, which was above market expectations of 195,000 and the downwardly revised prior month figures at 192,000, which was welcomed news.

Later in the day the Federal Reserve announced another 75 basis points (bps) rate rise, this was the fourth consecutive 75 bps hike, raising its benchmark rate to a range of 3.75% to 4.00% and the sixth rate rise since March 2022. The tough monetary policy stance continued as a means to rein in persistently high inflation although concerns were expressed about the wider economy and the financial difficulties this will cause to millions of households and businesses alike.

After a day where the market seesawed from a low of 110.26 to test the midpoint of the Daily Bollinger Bands hit resistance and drop the U.S. Dollar Index ® ultimately closed the day at 111.23 with a loss of 0.12%.

The U.S. Dollar bulls returned with vigor on 3rd November and the U.S. Dollar Index ® gapped up.

ISM Service PMI data for October was released, recording 54.4 against expectations of 55.5 and a slowdown on the prior month of 56.7, nonetheless the bulls gained momentum as it blasted through the midpoint of the Daily Bollinger Bands. The U.S. Dollar Index ® closed with a gain of 0.69% at 112.80.

Nonfarm Payroll data released on 4th November announced 284,000 new jobs were created during October (revised upwards from 261,000) beating market expectations of 200,000 although a decline on the revised numbers from the prior months recorded figures which reported a gain of 315,000 (revised from 263,00).

Data published also revealed that the unemployment rate for October had unexpectedly increased to 3.7% (from 3.5% the prior month). Wages continued to rise, with average hourly earnings increasing by 0.5%, a slight increase on the rise published for September. After initial reactions were mildly positive, the U.S. Dollar Index ® reversed and the bears gained control. The U.S. Dollar Index ® traded lower to close with a loss of 1.86% at 110.77, a significant weakness against the basket of currencies traded within the index.

The U.S. Dollar Index ® closed the trading week ending 4th November with a modest gain of 0.09% at 110.77.

The bearish momentum observed during Friday's trading continued into the following trading week and the U.S. Dollar Index ® closed on 7th November with a loss of 0.91% at 109.99.

Trading on 8th November saw the bearish sentiment continue as money flowed out of the safe haven after the demand for the U.S. Dollar dropped. The U.S. Dollar Index ® traded lower until the market reached the lower boundary of the Daily Bollinger Bands where buyers stepped in and the U.S. Dollar Index ® lifted to regain some of the earlier losses. The U.S. Dollar Index ® closed the day with a loss of 0.42% at 109.54.

The demand for the U.S. Dollar drove the market higher throughout the majority of trading on 9th November and the U.S. Dollar Index ® closed at 110.46 with a gain of 0.76%.

The latest inflation figures released on 10th November showed the pace of inflation slowed for a fourth consecutive month as Consumer Price Index (CPI) data for all items 12-month ending October announced prices rose by 7.7% falling from 8.2% the prior month. This represented the lowest 12-month increase since January 2022.

The Core inflation rate, which represents all items excluding food and energy, softened to 6.3% over the 12-month period ending October, compared to data released for September which represented a 40-year high at 6.6%.

U.S. Dollar Index ® after making a high for the day at 110.89, when it pierced the Daily 20 EMA hit a pocket of selling pressure within a 4–hour resistance area at 110.79 - 111.17 and the bears took control to send the market lower. The U.S. Dollar Index ® closed the day below the lower boundary of the Daily Bollinger Bands at 108.09 with a loss of 1.92%.

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

The bearish momentum continued into trading on 11th November which was further exacerbated as the Michigan Consumer Sentiment Index published below expected figures of 54.7 against expectations at 59.5 and September data at 59.9. The U.S. Dollar Index ® closed the day at 106.16 with a loss of 1.75%

The U.S. Dollar Index ® closed the week of 11th November at 106.16 with a loss of 4.36%.

Monday 14th November trading was lackluster and the U.S. Dollar Index ® closed an inside day at 106.53 with a small loss of 0.12%. The market struggled to gain any clear direction during trading on 15th November and after reaching a low of 105.16, the market rose as buyers returned. The U.S. Dollar Index ® closed the day down 0.57% at 105.29, just inside the lower boundary of the Daily Bollinger Bands.

On 16th November, Retail Sales data surprised the market as data showed a growth of 1.3% against market expectations of 1.0% and above the prior month’s flat recording. Even with this positive news, the U.S. Dollar Index ® struggled to lift and closed the day at 106.15 with a loss of 0.30%.

Throughout the last two trading days of the week, the U.S. Dollar Index ® slowly began to rise posting higher closes with an overall gain of 0.54% over this period. The U.S. Dollar Index ® closed the week of 18th November with a small gain of 0.16% at 106.83.

The demand for the U.S. Dollar continued into Monday’s trading and bulls drove the market higher on 21st November. The market reached a high of 107.90, which coincided with a resistance area on a 4-hour timeframe at 107.95 - 108.32 before it pulled back slightly. The U.S. Dollar Index ® closed the day up at 107.73 with a gain of 0.77%.

The resistance area held and bears regained control during trading on 22nd November and the U.S. Dollar Index ® traded lower throughout the day to close down at 107.12 with a loss of 0.42%.

The bearish moment gathered pace on 23rd November as money continued to move away from the safe haven. Data released for Durable Goods Orders for October showed an increase in orders by 1.0% after September's revised figures published an increase of 0.3% (downwardly revised from 0.4%) and above market expectations of 0.4%. This had little impact on the direction of the market after release.

Nondefense Capital Goods Orders ex. Aircraft also released on 23rd November showed significant improvement as data published an increase of 0.7%, above market expectations of 0.% and the downwardly revised -0.8% data released for September (revised from -0.7%), again little impact at the time of release.

FOMC minutes released confirmed the rate rise announced earlier in the month and gave indications that the Federal Reserve may adopt smaller rate rises moving forward. Whilst inflation is unlikely to drop anywhere close to the target range for some time some officials expressed concerns over the impact the rises will have with financial stability and the economy. The U.S. Dollar Index ® closed 23rd November at 105.97 with a loss of 1.01%.

After the movement in the market the prior day, trading on 24th and 25th November was sideways and whilst each day posted a slight increase on open, a gain of 0.08% and 0.07% respectively there was little overall movement in any direction. The U.S. Dollar Index ® closed the week of 25th November with a loss of 0.93% at 105.92.

During the final week of November trading the U.S. Dollar bulls drove the market higher during the early part of the week to close on 28th November at 106.63 with a gain of 0.48% and 29th November at 106.77 with a gain of 0.15%.

On 30th November ADP Employment Change Figures released showed private sector jobs increased by 127,000 which was significantly below market expectations of 200,000 and the prior month figures at 239,000.

Also out on 30th November was GDP data (preliminary) which brought welcomed news as the U.S. economy expanded by an annualized 2.9% for quarter three, exceeding expectations of 2.6% and a gain on the prior month’s preliminary figures of 2.6%. Even on this news, the U.S. Dollar bulls failed to maintain control and as the market reached overhead resistance at 106.71 - 107.14 on a 4-hour timeframe weakness came and the bears returned. The U.S. Dollar Index ® dropped to close at 105.90 with a loss of 0.72%.

The U.S. Dollar Index ® closed the month with a loss of 4.97% at 105.90 as the market continued to drop from September’s high. The uptrend was broken on the weekly timeframe during November and a new downtrend had formed. On the daily timeframe, U.S. Dollar Index ® broke to the downside into a confirmed downtrend.

UPCOMING HIGH IMPACT EVENTS

• Thr 1 Dec ISM Manufacturing PMI (Nov)
• Fri 2 Dec Nonfarm Payrolls (Nov)
• Mon 5 Dec ISM Services PMI (Nov)
• Fri 9 Dec Michigan Consumer Sentiment (Dec) PREL
• Tue 13 Dec Consumer Price Index (Nov)
• Wed 14 Dec Fed Interest Rate Decision
• Wed 14 Dec Fed’s Monetary Policy Statement
• Wed 14 Dec FOMC Economic Projections
• Wed 14 Dec FOMC Press Conference
• Thr 15 Dec Retail Sales (Nov)
• Thr 22 Dec Gross Domestic Product Annualized (Q3)
• Fri 23 Dec Durable Goods Orders (Nov)
• Fri 23 Dec Nondefense Capital Goods Orders ex. Aircraft (Nov)

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