May got off to a disappointing start for the U.S. Dollar Index ® (USDX) after mixed economic data and the Fed's decision to keep rates unchanged at 5.25%-5.50% for the sixth straight meeting on May 1st. The U.S. Dollar Index ® fell after the release of ADP Employment change which announced the creation of 192,000 new private sector jobs, falling short of the revised March numbers of 208,000. The downward move continued after the release of worse-than-expected ISM Manufacturing PMI data and later the Fed's decision to hold interest rates steady as concerns to grapple inflation remained. After reaching a monthly resistance area with a high of 106.38, the U.S. Dollar Index ® closed at 105.65, recording a loss of 0.55%. The weakness in the U.S. Dollar gained traction on May 2nd and the U.S. Dollar Index ® closed lower at 105.18 with a loss of 0.39%. The downward momentum continued into May 3rd after Nonfarm Payrolls missed expectations with 175,000 new jobs added and falling short of the upwardly revised March data. Following this ISM Services PMI data announced a sharp drop, falling to 49.40, reflecting the first contraction in service sector activity since December 2022. The U.S. Dollar Index ® broke below a key daily support area at 105.31 – 105.06, reached a low of 104.41 to find support near the lower boundary of the daily Bollinger Bands. The U.S. Dollar Index ® closed the day with a loss of 0.24%, at 104.92 and closed the first week of May with a loss of 0.91%.

The following week, after finding support, the U.S. Dollar Index ® closed higher for three consecutive days and retested the midpoint of the daily Bollinger Bands on May 9th. This move caused the U.S. Dollar Index ® to fall and close lower for the day, with a loss of 0.29%. However, the market regained momentum on May 10th and headed higher as the bulls returned unphased by weak Michigan Consumer Sentiment Index preliminary data which had little impact on the U.S. Dollar Index ® trajectory which closed with a modest gain of 0.09%. The U.S. Dollar Index ® closed the second week up with a gain of 0.27% at 105.18.

On May 13th the U.S. Dollar Index ® closed at 105.10 with a small loss of 0.06%. However, the market slid further after the release of the Producer Price Index (PPI) data on May 14th. This data showed an unexpected increase of 0.5% month-over-month in April, higher than the forecasted 0.3% rise. The Producer Price Index excluding food & energy for 12 months ending April saw an increase from 2.1% to 2.4%. This indicated that inflationary pressures at the producer level remained stubbornly high in the early second quarter, weighing on the U.S. Dollar Index ® which closed with a loss 0.17% at 104.89.

The more significant impact on the U.S. Dollar Index ® weakness came from the release of Core Inflation and Consumer Price Index (CPI) data on May 15th. The downside momentum increased after the release of Core Inflation excluding food and energy dropped to a rate of 3.6%, for the 12-month period ending April from 3.8%. Additionally, the Consumer Price Index (CPI) for the same period showed a decline with annual inflation for all items recording a rate of 3.4%, lower than the previous 3.5%. Soft Retail Sales data for April showed a headline figure with no growth compared to expectations of a 0.4% increase, and the control group declining 0.3%. As a result, the U.S. Dollar Index ® experienced its largest single-day decline of the month, closing 0.69% lower. On May 16th the U.S. Dollar Index ® found support at 104.10 – 103.64 and the bulls returned and the U.S. Dollar Index ® closed with a gain of 0.23%. On May 17th the demand for the U.S. Dollar cooled and the U.S. Dollar Index ® closed with a small loss of 0.06% to end the third week with a loss of 0.80% at 104.33.

The following week saw a resurgence in demand for the U.S. Dollar, with the U.S. Dollar Index ® closing higher for four consecutive days. The greatest gain of the week was on May 22nd after the release of the FOMC minutes, the minutes shared the unanimous decision to keep rates unchanged at 5.25% - 5.50%, noting that while inflation had eased over the past year, the rate remained elevated, and lack of progress toward the 2% target was a concern. The hawkish tone signaled by the minutes led to the U.S. Dollar Index ® closing higher on the day at 104.84 with a gain of 0.29%. On May 23rd the S&P Preliminary Global Services PMI data showed an unexpected increase in growth to 54.8, exceeding forecasts and the prior release. Additionally, the S&P Preliminary Global Manufacturing PMI data surprised the markets with an increase in manufacturing activity, rising to 50.9, beating forecasts and the prior month. The U.S. Dollar Index ® strengthened on this news to close with a gain of 0.19%. The demand for the U.S. Dollar persisted until the U.S. Dollar Index ® reached a high on May 24th testing the midpoint of the daily Bollinger Bands at 105.05 when the bears returned, and the market closed lower at 104.64 with a loss of 0.34%. The U.S. Dollar Index ® closed the week with a gain of 0.26%.

On May 27th, the bearish momentum continued and the U.S. Dollar Index ® closed lower. However, the demand for the U.S. Dollar returned on May 28th after the U.S. Dollar Index ® reached a daily support area previously tested May 16th. This led to a bounce where the market closed higher for two consecutive days. May 29th saw the largest daily gain of the month with the U.S. Dollar Index ® climbing 0.42% to 105.03. However, the release of the GDP Annualized Q1 report data tempered this rally after the report pointed to a fall in anticipated growth from 1.6% to 1.3%. Consequently, the U.S. Dollar Index ® gave up the prior day's gains and closed the day with a loss of 0.42%. The bearish momentum continued into the final trading day, where the U.S. Dollar Index ® closed the day with a loss of 0.10% to end the week with a loss of 0.07%.

The U.S. Dollar Index ® closed the month at 104.57 with a loss of 1.54%. This marked an end to the consecutive bullish monthly closes and led to the first losing month for the U.S. Dollar Index ® in 2024.

The U.S. Dollar Index ® was in a downtrend on the daily timeframe using the daily SMA & EMA, 20 and 30. However, the U.S. Dollar Index ® remained in an uptrend on the weekly timeframe, based on the weekly SMA 20 and 30 and weekly EMA 20 and 30.

Source: ICE Connect

Source: ICE Connect

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