The month began with the USDX experiencing significant volatility. The index initially surged to a high of 109.75, testing a daily resistance area between 109.43 and 110.02 while challenging the upper boundary of the daily Bollinger Bands before retreating sharply. The rally proved short-lived despite the release of positive ISM Manufacturing PMI data, which rose to 50.9 from December's 49.2, indicating an expansion in the factory sector for the first time in over two years; nonetheless, the USDX failed to maintain its upward momentum. As bearish sentiment took hold, the index dropped significantly, marking a substantial loss of 0.85% and closing the day at 108.30, falling below the midpoint of the Bollinger Bands. This decline represented the month's worst single-day performance for the U.S. Dollar Index ®. The bearish momentum continued, with the USDX closing lower for two consecutive days, down 0.64% and 0.33%, respectively. Despite better-than-expected ADP Employment Change figures released on February 5th, the ISM Services PMI missed expectations, declining to 52.8. Demand for the U.S. Dollar returned on February 6th, with the USDX closing slightly higher at 107.56, gaining 0.04%. The week ended more positively following the release of January's Nonfarm Payrolls data. While the headline number missed expectations with 143,000 new jobs created against the anticipated 170,000, the unemployment rate edged lower to 4.0%, and annual wage inflation ticked up to 4.1%. The USDX closed at 107.98 with a gain of 0.35%, ending the week with a loss of 1.19%.

The following week, the USDX experienced further volatility. Initially, it gapped up at the open and traded above the midpoint of the daily Bollinger Bands before closing the day down 0.05% at 108.21. On February 11th, the demand for the U.S. Dollar weakened further, and the USDX closed lower at 107.78, down 0.42%, trading below the midpoint of the daily Bollinger Bands. February 12th saw the release of Annual Core Inflation data, which rose to 3.3%, surpassing expectations of 3.1% and the previous release of 3.2%. The broader Consumer Price Index (CPI) also increased to 3.0% from 2.9%, marking a steady climb over four months. This mixed economic picture suggested ongoing challenges for Federal Reserve policy, with core inflation remaining above the 2% target. The U.S. Dollar Index ® closed marginally lower at 107.89, down 0.01%. The following day, the demand for the U.S. Dollar continued to falter following the release of the Producer Price Index (PPI) excluding food and energy. The PPI rate came in at 3.6%, surpassing expectations but falling short of December's revised increase of 3.7%. The USDX closed the day down 0.84% as the market digested the recent inflation reports. Bearish momentum persisted into the final trading day of the week after the release of disappointing Retail Sales data, which fell from a growth of 0.7% to a contraction of 0.9%, with the USDX trading into a daily support area at 106.89 - 106.40 before closing within the area at 106.69, down 0.29%. Overall, the U.S. Dollar Index ® ended the week with a loss of 1.56%.

On February 17th, the USDX opened in the support area, and while demand for the U.S. Dollar returned, the index struggled to rise and closed the day at 106.61, down 0.05%. The following day, bullish sentiment returned, and the USDX closed up 0.22%, lifting from the support area. The Federal Reserve's FOMC minutes, released on February 19th, revealed that interest rates were maintained at 4.25% to 4.50%. The economy showed solid growth and low unemployment, but inflation remained slightly elevated. The Fed emphasized a cautious approach and would continue to carefully monitor economic data before making further rate adjustments. Early gains made during the day were engulfed as the market reacted to the statement and dropped. Ultimately, the U.S. Dollar Index ® rose 0.10% to close the day at 107.07. The following day, demand for the U.S. Dollar continued to weaken, and the USDX dropped 0.71%, closing below the lower boundary of the daily Bollinger Bands and breaking through the support area that had recently held. The week ended with mixed economic data. The S&P Global Manufacturing PMI for February came in at 51.6, slightly above expectations, indicating continued expansion, while the S&P Global Services PMI registered an unexpected sharp contraction to 49.7 from 52.9, marking the first contraction in over two years. Despite these mixed signals, the U.S. Dollar Index ® closed at 106.55 with a gain of 0.18% but ended the week down 0.13%.

The final week of February brought further volatility, driven by mixed economic data releases and political developments. On February 24th, the USDX reached a low of 106.03, testing the weekly 30 EMA, before rebounding to close up 0.15% at 106.62. However, the sentiment shifted on February 25th, as demand for the U.S. Dollar weakened and the index closed down 0.45%. On February 26th, the release of Q4 2024 Preliminary GDP data revealed the U.S. economy grew at an annualized rate of 2.3%, as anticipated, indicating a steady growth. The bulls returned, and the U.S. Dollar Index ® closed the day with a 0.30% gain. The bullish momentum strengthened on February 27th, and the USDX closed up 0.66%. The week ended with the release of the Core Personal Consumption Expenditures Price Index for January. The announcement met expectations with a 0.3% month-on-month increase and a 2.6% year-on-year rate. The U.S. Dollar Index ® broke above the midpoint of the daily Bollinger Bands and tested a daily resistance area at 107.07 - 108.42 before closing at 107.51 with a gain of 0.35%. This three-day rally in the latter half of the week led to the U.S. Dollar Index ® closing the week up 0.98%. However, despite this late recovery, the U.S. Dollar Index ® ended February at 107.51, reflecting a monthly decline of 1.57%.

The U.S. Dollar Index ® maintained its uptrend during February on the weekly timeframe, trading above the weekly SMA and EMA 30 and 50. In contrast, the daily chart presented a more complex picture, with the USDX generally trending downward over the month as it frequently traded below the 20 and 30 EMAs and SMAs on the daily timeframe, although there were instances of convergence with these moving averages.

Source: ICE Connect

Source: ICE Connect

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