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ICE

Macro Commentary


The U.S. Dollar Index ® (USDX) closed the month at 103.25 with the largest monthly gain since May 2012 at 4.99%. U.S. Dollar Index ® traded to an April high at 103.95, the highest the USDX had traded in 2 years.

  • Nonfarm Payrolls data released on 1st April came in with 431,000 new jobs created in March, falling significantly below expectations of 490,000. Positive news however came from a revision to February’s jobs data as the numbers increased from 678,000 to 750,000. This resulted in a positive day of trading as the USDX closed at 98.63 with a gain of 0.27%.
  • The Federal Open Market Committee (FOMC) minutes released on 6th April shared the confidence in the strengthening of economic activity, the strong jobs market in recent months and lowering unemployment. Concerns continued around inflation and that it is likely to remain elevated based on a number of factors including higher energy prices and issues related to the pandemic. Inflation will be measured closely and appropriate action taken. The FOMC also expects to reduce its Balance Sheet by $95 billion per month. The USDX closed the day at 99.62 with a gain of 0.14%.
  • Consumer Price Index (CPI) data released on 12th April showed annual inflation continued to gain momentum with all items recording an increase of 8.5% before seasonal adjustments for the 12-month period ending March, the highest since December 1981. Prices for all items less food and energy rose to 6.5% over the last 12 months, the highest level posted in 40 years, setting another record increase. The USDX closed the day at 100.29 with a gain of 0.27%.

U.S. Dollar Index® Focus

U.S. Dollar Index® Focus chart

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 ® started April trading on a firm footing with the bulls in control from the start of trading. The demand for the U.S. Dollar continued to increase after taking a bounce off the daily support area at 97.85 – 97.29 on the last trading day of March. On 1st April Nonfarm payrolls added 431,000 new jobs, even though it came in below market expectations this release did not seem to faze the market. In addition to this March data had been revised upwards from 678,000 to 750,000. ISM Manufacturing PMI data released on the same day fell to 57.1 compared to the prior month's release at 58.6 and below expectations 59.0. Again, this disappointing news did not seem to dampen U.S. Dollar demand as the bulls drove price higher. The U.S. Dollar Index ® closed the first day of trading on Friday at 98.63 with a gain of 0.27%, clawing back some of the losses made earlier in the week and testing the daily 20 SMA that the market has traded below for the prior 3 days. After the positive gains made on 1st April trading the U.S. Dollar Index ® ended the week at 98.63 down 0.22%.

The bullish momentum for the U.S. Dollar continued into the following week of trading as the U.S. Dollar Index ® continued to rally, this time to re-establish a firm close above the daily 20 SMA and end 4th April trading up 0.35% at 98.97. ISM Services PMI data for March was released on Tuesday 5th April bringing welcomed news to the market as the data came out above expectations at 58.3 (against 58.0) and a gain on the prior month release of 56.5. This upward move drove the U.S. Dollar Index ® back into the daily resistance area at 99.08 - 99.43 which had been tested on two prior occasions. This was the third retest and whilst sellers were evident, the U.S. Dollar Index ® just pierced through the area before sellers stepped in driving prices lower to close on the upper boundary of the area. The U.S. Dollar Index ® closed up for the day at 99.43 with a gain of 0.46%, the fourth consecutive positive close.

The Federal Open Market Committee (FOMC) minutes released on 6th April confirmed the details subsequent to the FOMC meeting held in March. The minutes highlighted economic activity and employment had continued to strengthen and acknowledged that inflation remained at an elevated level. Fed Chair Jerome Powell previously recognized that the Fed might increase rates more aggressively than initially planned to help curb inflation. There is a possibility that planned rate hikes could be as high as 50 basis points at the next FOMC meeting if inflation intensifies. This comes after the 25 basis point rise in March, the first rate increase since December 2018.

As inflation has been brought to the forefront 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.

The chart below provides the historical Index settings over the past year:

U.S. Historical chart of the ICE U.S. Dollar Inflation Expectation Indexes

U.S. Historical chart of the ICE U.S. Dollar Inflation Expectation Indexes

The U.S. Dollar Index ® started April trading on a firm footing with the bulls in control from the start of trading. The demand for the U.S. Dollar continued to increase after taking a bounce off the daily support area at 97.85 – 97.29 on the last trading day of March. On 1st April Nonfarm payrolls added 431,000 new jobs, even though it came in below market expectations this release did not seem to faze the market. In addition to this March data had been revised upwards from 678,000 to 750,000. ISM Manufacturing PMI data released on the same day fell to 57.1 compared to the prior month's release at 58.6 and below expectations 59.0. Again, this disappointing news did not seem to dampen U.S. Dollar demand as the bulls drove price higher. The U.S. Dollar Index ® closed the first day of trading on Friday at 98.63 with a gain of 0.27%, clawing back some of the losses made earlier in the week and testing the daily 20 SMA that the market has traded below for the prior 3 days. After the positive gains made on 1st April trading the U.S. Dollar Index ® ended the week at 98.63 down 0.22%.

The bullish momentum for the U.S. Dollar continued into the following week of trading as the U.S. Dollar Index ® continued to rally, this time to re-establish a firm close above the daily 20 SMA and end 4th April trading up 0.35% at 98.97. ISM Services PMI data for March was released on Tuesday 5th April bringing welcomed news to the market as the data came out above expectations at 58.3 (against 58.0) and a gain on the prior month release of 56.5. This upward move drove the U.S. Dollar Index ® back into the daily resistance area at 99.08 - 99.43 which had been tested on two prior occasions. This was the third retest and whilst sellers were evident, the U.S. Dollar Index ® just pierced through the area before sellers stepped in driving prices lower to close on the upper boundary of the area. The U.S. Dollar Index ® closed up for the day at 99.43 with a gain of 0.46%, the fourth consecutive positive close.

The Federal Open Market Committee (FOMC) minutes released on 6th April confirmed the details subsequent to the FOMC meeting held in March. The minutes highlighted economic activity and employment had continued to strengthen and acknowledged that inflation remained at an elevated level. Fed Chair Jerome Powell previously recognized that the Fed might increase rates more aggressively than initially planned to help curb inflation. There is a possibility that planned rate hikes could be as high as 50 basis points at the next FOMC meeting if inflation intensifies. This comes after the 25 basis point rise in March, the first rate increase since December 2018.

As inflation has been brought to the forefront 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.

The chart below provides the historical Index settings 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 Committee plans to start reducing their bond holdings by $95 billion per month possibly as early as May. Whilst this information was not a surprise to the markets, the U.S. Dollar bulls continued to drive prices higher. The U.S. Dollar Index ® traded through the daily resistance area previously tested, breaking out of the range it had been trading in throughout March and into early April to close above at 99.62 with a gain of 0.14%.

The trading day on 7th April was slightly choppy with little clear direction throughout the day whilst the bulls continued to drive price steadily higher there was overhead resistance at 99.70 – 100.00 on a daily chart stalling the upward momentum. The U.S. Dollar Index ® pushed higher and closed for a fifth consecutive daily gain at 99.76 up by 0.10%.

On 8th April, the U.S. Dollar bulls continued to make gains during early trading, however the U.S. Dollar struggled to gain significant ground due to resistance. The U.S. Dollar Index ® managed to pierce the upper boundary of the daily resistance area before sellers came in driving prices lower. The U.S. Dollar Index ® closed trading at 99.75 the first daily loss of the month at 0.07%. Overall, the U.S. Dollar Index ® ended the trading week at 99.75 with a gain of 1.14%.

On 11th April trading was choppy with the bulls and bears both jostling to gain ground after the market dropped from the prior day’s highs yet the bulls pushed back and the market remained trading within the daily resistance area at 99.70 – 100.00. The bulls gained the upper hand by close and the U.S. Dollar Index ® ended the trading day at 99.92 with a gain of 0.23%.

The following trading day, 12th April the market continued to stair step upwards during early trading however, these gains were wiped out on the announcement of the Consumer Price Index data. The annual inflation rate for all items recorded an increase of 8.5% for the 12-month period ending March 2022 (before seasonal adjustments), the highest since December 1981 accelerated predominantly by rising energy prices. Prices for all items less food and energy rose to 6.5% over the last 12 months, the highest level in 40 years, setting another record increase albeit slightly below expectations of 6.6%. The U.S. Dollar Index ® dropped heavily within the first 30 minutes following the announcement to lose 0.40% of its value, although the market regained ground as the bulls returned for the remainder of the trading day and drove prices higher. The U.S. Dollar Index ® closed trading at 100.29 with a gain of 0.27% breaking through and closing above the resistance area 99.70 – 100.00.

On 13th April, the U.S. Dollar Index ® continued to trade higher during early trading although the bulls were challenged as the U.S. Dollar bears regained control during the U.S. trading session sending the U.S. Dollar lower throughout the remainder of the day. The U.S. Dollar Index closed trading at 99.91 with a loss of 0.41%.

On 14th April the bulls returned with more momentum behind them as the U.S. Dollar rallied throughout the day until the market reached an area of daily resistance at 100.53 – 101.03. The sellers returned and the bears recaptured some ground as the market began to fall, ultimately this was not enough to cover earlier gains made and the U.S. Dollar Index ® closed trading at 100.33 with a gain of 0.49% with an overall weekly gain of 0.64%.

15th Good Friday – No trading.

After the long weekend, the market reopened for trading on 18th April with a positive footing as the bulls continued to take charge and the market rallied higher within the area of daily resistance at 100.53 – 101.03 with little push back from the sellers. The U.S. Dollar Index ® closed trading at 100.77 with a gain of 0.31%.

On 19th April, this bullish momentum continued and with little challenge by the bears the U.S. Dollar Index ® closed trading with a gain of 0.16% at 100.96 almost reaching the upper boundaries of the area. By 20th April, the U.S. Dollar bears came back with some force as prices just breached the upper boundary of the resistance area and the U.S. Dollar Index ® began to fall. Trading closed at 100.42 with a loss of 0.58%, the largest daily drop of the month so far.

After the sell off on 20th April and trading throughout the Asian session on 21st April the U.S. Dollar Index ® began to recover making up for some of the prior losses. In a speech delivered during the day by the Fed Chair, Jerome Powell opened the door to the possibility of the Fed raising rates by 50 basis points at the May meeting to counteract inflation. This would be a significant move if the Fed made this decision, as it would be the first back-to-back rise since 2006. The U.S. Dollar Index ® closed trading at 100.61 with a gain of 0.26%. 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 bullish momentum continued into trading on 22nd April where the U.S. Dollar Index ® blasted through the resistance area which had been holding prices down to close the trading day at 100.21 with a gain of 0.57%. The full week of trading the U.S. Dollar Index ® closed with a gain of 0.74%.

On 25th April, the U.S. Dollar Index ® continued to strengthen as the bulls were firmly in control and by the close the U.S. Dollar Index ® gained 0.66% to end the day at 101.77. This was the largest daily gain for April. The bullish move continued into 26th April and whilst Durable Goods Orders for March came out at 0.8% (below expectations of 1%) it was a significant increase in the -1.7% (revised from -2.2%) published for February. Data released for Nondefense Capital Goods Orders ex Aircraft for March was positive news at 1.0% beating expectations if 0.5% and the prior months -0.3%.The U.S. Dollar Index ® closed the day at 102.32 with another strong gain of 0.60% although edging closer to a daily resistance area at 103.15 – 106.63.

With more space to the upside, 27th April did not disappoint with the U.S. Dollar bulls driving prices higher for the fifth consecutive trading day. The U.S. Dollar Index ® closed with a gain of 0.62% at 102.96, just dipping into the daily resistance area to reach a high of 103.29 before pulling back.

The U.S. Dollar Index ® continued to extend the gains made as the rally continued throughout the day on 28th April as prices reached deep within the resistance area at 103.15 – 106.63 no significant weakness showed. The U.S. Dollar Index ® pulled back slightly from the high of the day at 103.95 the U.S. Dollar Index ® closed up for the day at 103.66 with a gain of 0.63%.

As prices dropped from the prior day's high, more downside momentum gathered as the bears took charge throughout 29th April, the U.S. Dollar Index ® closed trading at 102.96 with a loss of 0.70%. The largest one-day loss in April, however this did not change the overall picture for the final week of April trading as the U.S. Dollar Index ® closed at 103.25 with a gain of 2.12%. The greatest weekly gain of the year so far.

The uptrend continues on the U.S. Dollar Index ® in the weekly timeframe and the daily uptrend has resumed after breaking out of the sideways range that the market had traded between throughout the majority of March and early April trading (support area at 97.85 – 97.29 and resistance area at 99.08 – 99.43).

The U.S. Dollar Index ® closed the month at 103.25 with a gain of 4.99% the largest monthly gain since May 2012 and April's high at 103.95, the highest U.S. Dollar Index ® has traded in two years.

Correlations


The charts identify price turning points between U.S. Dollar Index ®, Brent Crude Oil (BRN) and Bitcoin (XBT) which could be used to identify periods during which prices of each of the markets appear positively or negatively correlated.

Brent Crude Oil (BRN): Positive (since September)

NYSE® Bitcoin Index (XBT): Negative (since January)

Source: ICE Connect

USDX® Performance


Spot RatesTicker1-Apr-2229-Apr-22Monthly Change
USD/EUREUR A0-FX1.10471.0541
-4.800%
JPY/USDJPY A0-FX122.49129.83
-5.654%
USD/GBPGBP A0-FX1.31121.2571
-4.304%
CAD/USDCAD A0-FX1.25181.2856
-2.629%
SEK/USDSEK A0-FX9.35729.8166
-4.680%
CHF/USDCHF A0-FX0.925330.97318
-4.917%
US Dollar IndexDX A098.632102.959
4.203%
Front MonthTicker1-Apr-2229-Apr-22Monthly Change
Mini USDXSDX-ICS98.627102.963
4.211%
Other ContractsTicker1-Apr-2229-Apr-22Monthly Change
Mini Brent CrudeBM-ICS104.39109.34
4.527%
MSCI World IndexMWL3052.42776.1
-9.953%
MSCI Emerging Markets IndexMME1143.61057.4
-8.152%
Mini US Dollar/Offshore Renminbi CHM-ICS6.37136.6267
-3.854%
Mini USDX Correlations20 Days90 Days255 Days
Mini Brent Crude-0.32-0.42-0.18
MSCI World Index-0.92-0.67-0.11
MSCI Emerging Markets Index-0.90-0.94-0.94
Mini US Dollar/Offshore Renminbi 0.920.68-0.30

Source: ICE Connect

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