The bearish momentum from the last trading session in November continued into early December trading, as the demand for the U.S. Dollar continued to fall. The move to the downside was exacerbated by poor ISM Manufacturing PMI data released for November. The announcement showed manufacturing output continued to decline, recording a reading of 49.0 points, falling short of expectations of 49.8 and below the previous month's release at 50.2. This was the first contraction in manufacturing activity since May 2020. The U.S. Dollar Index ® closed the first day of December with a loss of 0.83% at 104.69.
Trading on the 2nd December was a rollercoaster as Nonfarm Payroll data was released. The announcement came with 263,000 new jobs created during November. which exceeded market expectations of 200,000. This however was a drop on the revised numbers issued which reported a gain of 284,000 (revised from 261,00) and the lowest reported for 2022 (after revisions). The unemployment rate remained steady at 3.7% and wages continued to rise with average hourly earnings increasing by 0.6% in November.
The U.S. Dollar Index ® rallied to make a high of the day at 105.58 before selling pressure returned and the market reversed as the bears gained control. The U.S. Dollar Index ® reached an area of support at 104.00 - 103.42 where buyers stepped in and the market closed the day with a loss of 0.28% at 104.50.
The U.S. Dollar Index ® closed the trading week ending 2nd December with a loss of 1.53% at 104.50.
The demand for the U.S. Dollar returned on 5th December after the market took a positive bounce from the daily support area. The bullish move was also aided by the ISM Service PMI data released for November. The data brought welcomed news as it recorded 56.5 against expectations of 53.1 and a gain on the prior month announcement of 54.4 (the lowest value recorded in over two years). The U.S. Dollar Index ® closed the day at 105.24 with a gain of 0.77%.
The bullish momentum continued into trading on 6th December where the U.S. Dollar Index ® had another positive close with a 0.43% gain at 105.54. The momentum to the upside however was reversed after the market reached a high of 105.80 on 7th December which fell within the boundaries of a 4-hour resistance area refined to 105.39 - 105.86 when the bears returned and drove the market lower. The U.S. Dollar Index ® closed trading down at 105.06 with a loss of 0.48% eliminating the prior day's gain.
With the bears back in control, the U.S. Dollar Index ® traded lower during trading on 8th December and the market closed down with a loss of 0.45% at 104.76.
The market had no clear direction on the last trading day of the week even though the Michigan Consumer Sentiment Index published above expected figures at 59.1 against expectations at 53.3 and data released in October at 56.8. The U.S. Dollar Index ® reached a high of 105.20 and a low of 104.41 on the day but ultimately the U.S. Dollar Index ® settled with a close at 104.80 and a modest gain of 0.03%.
The U.S. Dollar Index ® closed the week of 9th December at 104.80 with a gain of 0.35%.
The bulls returned on Monday 12th December and the U.S. Dollar Index ® traded higher although failed to close above the prior day’s high and closed at 105.10 with a gain of 0.24%.
The latest inflation figures released on 13th December showed the pace of inflation slowed for a fifth consecutive month as Consumer Price Index (CPI) data for all items 12-month ending November announced prices rose by 7.1% falling from 7.7% in October. This represented the lowest 12-month increase since December 2021.
The Core inflation rate, which represents all items excluding food and energy, softened to 6.0% over the 12-month ending November period which was slightly below expectations of 6.1% and the prior 12-month ending October at 6.3%.
The U.S. Dollar Index ® made a high for the day at 105.09, when selling pressure returned and the bears took control to send the market back into the daily area of support which was tested earlier in the month. The area held and after reaching a low of 103.53, the U.S. Dollar bulls returned and the U.S. Dollar Index ® closed the day at 103.94, just below the lower boundary of the Daily Bollinger Bands with a loss of 0.95%.
As inflation is set to play a key role in interest rate decisions throughout 2023, 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:
Historical chart of the ICE U.S. Dollar Inflation Expectation Indexes