INDEX WEIGHTING: EUR 57.6% | JPY 13.6% | GBP 11.9% | CAD 9.1% | SEK 4.2% | CHF 3.6%
The U.S. Dollar Index ® began the month of December on a positive note for the first day of trading after above expected data came out of the U.S. in relation to ADP employment change and ISM Manufacturing PMI. ADP employment change showed an increase in private sector jobs for November at 534,000 versus an expectation of 525,000, albeit a drop on the prior month's figures of 570,000. ISM Manufacturing PMI data for November came in at 61.1 against 61.0 (expected) publishing an increase on the prior month (60.8) suggesting continued expansion which has been seen for the past 18 months (June 2020 43.1). The market closed up for the day at 96.02 (+0.04%).
The bulls came out for the second day of trading in December as the market continued to climb higher and the U.S. Dollar Index ® closed up for the day at 96.16 (+0.09%) with the bulls back in control.
Nonfarm Payrolls released on 3rd December reported 210,000 jobs were created in November dramatically falling short of the expected 550,000 and the prior month's data (546,000). During the first 30 minutes of trading after the announcement the bears regained control of the markets, although this was short lived. The U.S. Dollar Index ® found a pocket of support on a 30 minute chart at 95.94 - 95.85 combined with a small gap up in price where buyers were waiting for an opportunity to go long the U.S. Dollar and the market quickly retraced to claw back some of the early losses. ISM Services PMI data for November came out later in the day above expectations at 69.1 against 65.00 which again helped lift the markets creating the high of the day at 96.45 before weakness crept in. The U.S. Dollar Index ® eventually closed where it opened the day at 96.11.
For the following two consecutive trading days the U.S. Dollar Index ® closed higher, although it struggled to gain much traction and after reaching a high of 96.59 on 7th December selling pressure returned. The U.S. Dollar Index ® dropped throughout the majority of the U.S. Session on 8th December slicing through the Daily 20 SMA that had been acting as support for the past five weeks as the bears were in control for much of the day. However, towards the end of the U.S. trading session, the market reached a support area on a 4-hour chart where buyers were waiting and the U.S. Dollar Index ® began to consolidate as this area held. The market closed for the day at 95.88 down 0.39% and closing below the Daily 20 SMA, the first time since 3rd November 2021.
During the Asian session, the market eventually started to lift and this momentum continued throughout the 9th December closing up at 96.25 with a 0.29% gain, recovering some of the losses made throughout the prior trading day.
Consumer Price Index data released on 10th December provided some movement in the U.S. Dollar Index ® as the data for all items came out at 6.8% for 12-months ending November, posting the largest 12-month increase since the period ending June 1982. Prices for all items less food and energy came out as expected as it rose to 4.9% over the last 12 months (ending November), an increase on the previous release at 4.6%. The first 30 minutes of trading saw the U.S. Dollar Index ® drop from 96.40 to close at 96.20 down 0.21%. The market after a small bounce to the upside could not overcome the weakness, as the bears stepped in over concerns of the long-term impact inflation will have. Even positive Michigan Consumer Sentiment data released later in the day (70.4 against an expected consensus of 67.1%, which would ordinarily be positive news for the U.S. Dollar) could encourage the buyers back in volume and the U.S. Dollar Index ® closed at 96.10 printing 0.14% loss for the day.
The 13th and 14th December trading was more positive with two consecutive higher closes for the day as the bulls gained control driving the market higher in anticipation of the 15th December with a lot of data being released from the U.S. due to the holiday season approaching.
First on the agenda for the 15th December was the Retail Sales data Month on Month for November publishing disappointing sales data at 0.3%, not only falling short of expectations of 0.8% but also significantly below October’s 1.8%. However, the initial negative reaction was short lived as the U.S. Dollar Index ® fell within the first 30 minutes after the release only to recover 30 minutes later and close higher than where the market was trading at the time of the announcement.
The Fed Interest Rate Decision issued later in the day with no changes to the 0.25% and issued the Monetary Policy Statement. In addition, the Federal Open Market Committee (FOMC) shared further information on their Economic Projections and ended the day with a Press Conference. Initial reactions to the Interest Rate announcement, policy statement and projections saw the U.S. Dollar Index ® rally to close with a 0.16% gain within 30 minutes of the release.
The market rallied straight into an area of resistance on a Daily chart at 96.66 - 96.94 which was nested inside a bigger picture Weekly area of resistance at 96.61 - 97.81 formed in July 2020. Whilst the wider area had been tested previously in November (forming the high of the month at 96.94 and a 16-month high), selling pressure was still evident. The bears stepped in and the market started to fall, this decline continued as the FOMC Press Conference began and further details emerged.
The FOMC kept interest rates near zero and updated the assessment on the progress the U.S. economy was making. The economic activity for the U.S. remained on track to expand and progress had been made in the vaccine program helping the economy to continue to move forward. The improving labour market with strong demand for labour meant the target toward maximum employment (one of the policy goals set by Congress) was on track and unemployment numbers continued to fall. The Committee referred to the concerns around inflation and that this is likely to remain above the target of 2% well into 2022, although they were hopeful that the levels will begin to decline towards the end of the year.
The Federal Funds Rate projection had been adjusted and increased to 0.9% by the end of 2022. The Committee also decided to double the pace of reductions in the asset purchases beginning mid-January 2022. The market closed the day at 96.48 down 0.01%.
This bearish tone continued the following day with the market again closing with -0.37% change from the open, although fortunes changed on 17th December when the bulls reappeared and took charge sending the U.S. Dollar Index ® rallying to close the day up by 0.59%. However, towards the close, the U.S. Dollar Index ® approached an area of resistance at 96.66 - 96.94 once more and the selling pressure returned with the bears fully asserting control and subsequently the market closed lower for four straight trading days. On 28th December the buyers returned and the day ended with U.S. Dollar Index ® printing its first gain in seven days of trading recording a gain of 0.15%.
The remaining days of the month were slightly choppy as the buyers and the sellers both had their time to shine, however overall the U.S. Dollar Index ® ended December down closing at 95.59 (-0.40%). Both the weekly and daily uptrend remained.
UPCOMING HIGH IMPACT EVENTS