To The Moon

Source: ICE Connect, ~30 Days

US Dollar -

The U.S. Dollar Index ® (USDX) closed October at 111.72 to break the four-month positive run. The USDX closed the month with a loss of 0.65%.

• Nonfarm Payrolls data released for September reported that 263,000 new jobs were created, beating expectations of 250,000 although a decline for the second consecutive month after September data posted an increase of 315,000 new jobs. The USDX closed the day at 112.68 with a gain of 0.42%.
• The Federal Open Market Committee (FOMC) minutes released on 12th October confirmed the earlier rate rise of 75 basis points at the meeting held on 21st September and clues to the Fed’s hawkish stance. The USDX closed the day at 113.22 with a small loss of 0.01%.
• Core Inflation (all items less food and energy) continued to increase over the last 12 months to reach a rate of 6.6%, up from 6.3% in August to post the highest rate seen since 1982. The USDX closed the day at 112.25 with a loss of 0.81%.

                                                                  DAILY TREND: SIDEWAYS

                                                                       INDEX WEIGHTING:

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

Source: ICE Connect

After reaching a fresh two-decade high on 28thSeptember, weakness came into the market and early October was no exception. The first day of trading the U.S. Dollar Index ® dropped as demand for the U.S. Dollar decreased with the bears firmly in control. ISM Manufacturing PMI data for September was released which showed manufacturing output declined to a rate of 50.9 compared to data released for August at 52.8. The announcement came in below market expectations of 52.2% as manufacturing growth continued its slowdown. The U.S. Dollar Index ® closed the day at 111.66 with a loss of 0.44%.

The bearish momentum continued on 4th October as money flowed out of the safe haven and into more risk based assets as U.S. stocks rallied higher. The benchmark S&P 500 had its largest two-day rally since April 2020. The U.S. Dollar Index ® closed the day in an area of support at 110-04 – 109.64 (formed on a 4-hour timeframe), just above a wider Daily support area of 109.87 – 109.04, with a loss of 1.37% at 109.98.

The bulls returned on 5th October and the U.S. Dollar Index ® rallied from the area of support aided by positive news relating to ADP Employment Change. Figures released showed private sector jobs increased by 208,000 against market expectations of 200,000 and upwardly revised prior month figures at 185,000. In addition, ISM Service PMI data for September published a rate of 56.7, whilst it showed a slowdown on the prior month of 56.9 the data was above expectations of 56. The U.S. Dollar Index ® closed with a gain of 0.85% at 111.01.

The bullish momentum gathered pace on 6th October as the U.S. Dollar Index ® extended its rally from the prior day as hawkish rhetoric observed during the past few days continued to come from Fed Officials regarding the aggressive rate hikes and concerns surrounding the outlook for 2023. The U.S. Dollar Index ® closed higher at 112.18, a gain of 1.18%.

Nonfarm Payroll data released on 7th October announced 263,000 new jobs were created during September beating market expectations of 250,000 jobs although this was a decline on the prior months reported figures of a gain of 315,000, to record the lowest monthly gain since April 2021. Data published also revealed that the unemployment rate for September had unexpectedly fallen to 3.5% (from 3.7%), matching July’s twenty-nine month low. Wages continued to rise, with average hourly earnings increasing by 0.3% matching the rise published for August and up 5.0% from a year ago. The U.S. Dollar Index ® traded higher on the day to close with a gain of 0.42% at 112.68.

The U.S. Dollar Index ® closed the trading week ending 7th October with a gain of 0.48%.

10th October trading the U.S. Dollar bulls drove the market higher and whilst the market pulled back slightly from the high of the day at 113.29 the U.S. Dollar Index ® closed the day positive at 113.07 with a gain of 0.37%.

Trading on 11th October was choppy as the bulls and the bears clashed to gain control, the bulls had the upper hand as information from the Bank of England created a drop on GBPUSD, as money moved to the safe haven of the U.S. Dollar. (The British Pound forms part of the basket of currencies the U.S. Dollar Index ® consists of). In addition, a report published by the International Monetary Fund (IMF) raised recessionary concerns and cut its 2023 global growth forecast. The U.S. Dollar Index ® closed with a gain of 0.11% at 113.13.

FOMC Minutes from the Fed’s September meeting released on 12th October indicated that higher interest rates are most likely to remain in place until inflation starts to fall. Policymakers noted the impact inflation is having on the economy and especially those on lower-incomes. The Committee had also raised their assessment path of what the Federal Funds rate would likely be to achieve their goals. In addition, some members of the Committee cited that the uncertainty in the global economic and financial environment and the outlook of U.S. economic activity would play a factor in the pace of further policy tightening.

The U.S. Dollar Index ® traded sideways for the majority of the day and closed the 12th October at 113.22 almost where it opened with a 0.01% loss.

The latest inflation figures released on 13th October showed the pace of inflation softened for a third consecutive month as Consumer Price Index (CPI) data for all items 12-month ending September announced prices rose by 8.2% falling from 8.3% the prior month. Lower rises in gasoline and fuel oil prices contributed towards the drop. The Core inflation rate, which represents all items excluding food and energy, showed another unexpected increase to 6.6% over the last 12-month period ending September, compared to data released for August at 6.3% and expectations of 6.5% to remain well above the Fed’s target rate of 2%. This represented the highest increase since 1982.

After making a high for the day at 113.85 and almost reaching the upper boundary of the Weekly Bollinger Bands combined with an area of resistance on a 4-hour timeframe at 113.92 – 114.75, the U.S. Dollar Index ® met resistance and dropped as the bears took control. The U.S. Dollar Index ® closed the day down at 112.25 with a loss of 0.81%.

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 14th October, the bulls returned and even when Retail Sales data fell below market expectations (0.2%) as sales remained flat in September, falling below the upwardly revised 0.4% increase in August the U.S. Dollar Index ® remained buoyant.

Positive data released later in the day from the Michigan Consumer Sentiment Index brought welcomed news, as it published above expected figures of 59.8 against expectations at 59 and August data at 58.6. The U.S. Dollar Index ® tested the midpoint of the Daily Bollinger Bands during the day where buyers stepped in and market rallied. The U.S. Dollar Index ® closed the day at 113.20 with a gain of 0.65%.

The U.S. Dollar Index ® closed the week at 113.20 with an overall gain of 0.49%.

Monday 17th October the U.S. Dollar Index ® bears returned as money flowed out of the safe haven, partly driven by positive reactions the equity markets had with the UK doing a U-turn on the previously announced mini-budget. Investors were also cautious of any central bank intervention from the Bank of Japan (the Yen forms part of the currency basket). The U.S. Dollar Index ® dropped throughout the trading day, broke through the midpoint of the Daily Bollinger Bands to rest on the Daily 20 EMA. The U.S. Dollar Index ® closed with a loss of 1.12% at 111.91.

On 18th October, the U.S. Dollar Index ® traded sideways throughout the day and closed at 111.99 with a modest gain of 0.02% after finding continued support from the Daily 20 EMA. The bulls returned on 19th October and the U.S. Dollar Index ® rallied to close up with a gain of 0.95% at 112.88.

After a bearish start to trading on 20th October, the Daily 20 EMA once again provided support and the bulls returned. The market rallied and recaptured some of the earlier losses. The U.S. Dollar Index ® closed the day at 112.82 down 0.07%.

On 21st October the market rallied during early trading although it just fell short of an area of resistance at 113.92 – 114.75 (formed on a 4-hour timeframe) when sellers stepped in. The bears returned and the U.S. Dollar Index ® dropped throughout the majority of the day. The U.S. Dollar Index ® closed at 111.98 with a close of 0.77% just below the Daily 20 EMA that had previously acted as support.

The U.S. Dollar Index ® closed the week with an overall loss of 1.05% at 111.98, the largest weekly loss since July 2022.

The U.S. Dollar bulls drove the market higher on 24th October to reach a high of 112.47 where it met resistance as it tested the midpoint of the Daily Bollinger Bands. The bears returned and the U.S. Dollar Index ® dropped until it found support towards the end of the trading day. The U.S. Dollar Index ® closed at 111.91 with a gain of 0.27%.

The bears regained control during trading on 25th October and the U.S. Dollar Index ® traded lower throughout the day to close down at 110.83 with a loss of 0.88%. The bearish moment gathered pace on 26th October as money continued to move away from the safe haven. The U.S. Dollar Index ® closed at 109.55 with a loss of 1.16% inside a Daily area of support at 109.87 – 109.04.

The buyers returned on 27th October as the demand for the U.S. Dollar increased and the market rallied from this support area. Data released for Durable Goods Orders for September showed an increase in orders at 0.4% after August's revised figures published an increase of 0.2% (upwardly revised from -0.2%) although slightly short of market expectations of 0.6%.

Nondefense Capital Goods Orders ex. Aircraft also released on 27th October showed significant decline as data published a drop to -0.7% markedly below expectations of 0.5% and the downwardly revised 0.8% data released for August (revised from 1.3).

Also out on 27th October was GDP data (preliminary) which brought welcomed news as the U.S. economy expanded by an annualized 2.6% for quarter three, exceeding expectations of 2.4% and a significant increase after the prior two negative quarters. The U.S. Dollar Index ® closed up at 110.45 with a gain of 0.92%.

On 28th October, the market continued to rally and the U.S. Dollar Index ® reached a high of 110.93, when it met resistance and the bears returned which caused the market to pullback. Nonetheless, the U.S. Dollar Index ® closed the day 110.61 with a gain of 0.19%.

The final week of October trading the U.S. Dollar Index ® closed the week with a loss of 0.90% at 110.61.

The bullish momentum continued on 31st October and the market rallied. The U.S. Dollar Index ® closed the final day of October trading at 111.42 with a gain of 0.67%.

Overall, the U.S. Dollar Index ® closed the month with a loss of 0.65% at 111.42 to end the prior four-month streak of positive closes. The uptrend remained intact on the weekly timeframe although we have seen a pullback on the daily timeframe and the market transitioned into a sideways trend.

UPCOMING HIGH IMPACT EVENTS

• Tue 1 Nov ISM Manufacturing PMI (Oct)
• Wed 2 Nov ADP Employment Change (Oct)
• Wed 2 Nov Fed Interest Rate Decision
• Wed 2 Nov Fed’s Monetary Policy Statement
• Wed 2 Nov FOMC Press Conference
• Thr 3 Nov ISM Services PMI (Oct)
• Fri 4 Nov Nonfarm Payrolls (Oct)
• Thr 10 Nov Consumer Price Index (Oct)
• Fri 11 Nov Michigan Consumer Sentiment (Nov) PREL
• Wed 16 Nov Retail Sales (Oct)
• Wed 23 Nov FOMC Minutes
• Fri 25 Nov Durable Goods Orders (Oct)
• Fri 25 Nov Nondefense Capital Goods Orders ex. Aircraft (Oct)
• Mon 28 Nov Gross Domestic Product Annualized (Q3) PREL
• Wed 30 Nov ADP Employment Change (Nov)

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