'Macro Commentary'January 2024
Financial Report Summary: U.S. Dollar Index Performance in January 2024
After a challenging end to 2023, the U.S. Dollar Index (USDX) closed higher in January 2024 at 103.09, due to increased demand for the U.S. Dollar, reflecting a 2.0% gain. Economic indicators influenced its performance included unexpected job growth reported for December, lower-than-expected core inflation, and the Federal Reserve's decision to maintain interest rates.
Market Highlights:
U.S. Dollar Index Performance and Economic Indicators:
Nonfarm Payrolls surprised the markets after 216,000 new jobs were added in December (later revised to 333,000 following January’s announcement), compared with the anticipated 170,000 and the downwardly revised November numbers at 182,000. After reaching a high of 102.83, the U. S. Dollar Index closed with a gain of 0.02% at 102.13.%.
Core Inflation, excluding food and energy, edged lower for the 12-month period ending December recording an increase of 3.9%, against the forecast of 3.8% to mark a new 2 ½ year low. The announcement disappointed the U.S. Dollar bulls as this was likely to impact future rate decisions as the Fed had been using higher
rates to help curb inflation, further rate rises are unlikely and it’s more likely we will see a hold or fall in rates as we move further into 2024. The U.S. Dollar Index closed the day with a loss of 0.02% at 102.02.
Th The Federal Reserve held rates steady at the conclusion of the January meeting to keep the benchmark Federal Funds rate in a range of 5.25% - 5.50%. The U.S. Dollar Index closed the day at 103.09 with a loss of 0.16%.
Daily and Weekly U.S. Dollar Index Performance:
On the initial trading day of 2024, the U.S. Dollar Index ® surged, marking a 0.82% increase, fuelled by a resurgence of bullish sentiment. This upward trend persisted through Wednesday, propelled by increased demand for the U.S. Dollar following the release of unexpectedly positive ISM Manufacturing PMI figures and the disclosure of the FOMC Minutes. There was a slight setback following the ADP Employment Change report on 4th January, which initially indicated the addition of 164,000 new private sector jobs for December (later revised to 158,000), although the U.S. Dollar Index showed resilience. However, it rebounded on the final trading day of the week with a modest 0.02% gain.
This uptick followed the surprising revelation of 216,000 new jobs in the Nonfarm Payroll report, revised significantly upward to 333,000 in January. The U.S. Dollar Index ® concluded the initial trading week of 2024 with a notable gain of 1.05%, closing at 102.13.
During the week starting January 8th, the U.S. Dollar Index ® traded sideways. On 11th January, Core Inflation slightly eased to 3.9%, while Consumer Price U.S. Dollar Index ® rose to 3.4%, surpassing expectations. Despite hitting 102.51, the Index closed at 102.02 with a slight loss. On 12th January, Core Producer Price Index eased to 1.8%, despite this the U.S. Dollar Index ® closed at 102.15 for the week, with a marginal loss of 0.02%.
On 15th January the U.S. Dollar Index ® closed within the prior week's range at 102.15. However, on 16th January, renewed demand pushed it to close at 103.11, marking a 0.54% gain and breaching the upper Bollinger Bands. The bullish trend continued 17th January, reaching 103.45 before closing at 103.21, with a 0.13% gain. The week ended with the Index at 103.07, posting an overall gain of 0.85%.
On 22nd January, the U.S. Dollar Index ® rose marginally by 0.08%. The next day, demand surged, breaking the previous week's highs, but faced resistance, closing at 103.40 with a 0.25% gain. Despite positive S&P Preliminary Global Services and Manufacturing PMI data on 24th January, the U.S. Dollar Index ®closed lower by 0.26%. Throughout the week, it traded within a range, finding support at the daily 10 EMA, ending the week at 103.23, up 0.19%.
In the last days of January, the U.S. Dollar Index ® traded sideways. On 31st January, the Federal Reserve announced its decision to keep interest rates unchanged for the fourth consecutive meeting. Following the announcement, the U.S. Dollar Index ®dropped to 102.75, using the midpoint of the daily Bollinger Bands for support. It rebounded from there to close the day at 103.09, although still closed with a loss of 0.16% on the final day of trading.
The U.S. Dollar Index ® closed the month with a 2.0% gain although the downtrend continued on the weekly timeframes whilst transitioned to an uptrend on the daily using the lower Moving Averages as support.
February 2024 High Impact Events:
Future upcoming high-impact events include), ISM Manufacturing PMI (1st), Non-Farm Payroll (2nd), Fed's Chair Powell speech (5th), ISM Services PMI (5th), Consumer Price Index (13th), Retail Sales (15th), Producer Price Index (16th), FOMC Minutes (21st) and GDP Q4 (28th), with potential to influence the U.S Dollar Index.
In summary, December witnessed an overall strong performance on the U.S. Dollar as demand increased, influenced by economic data, Fed decisions, and global events, resulting in a notable monthly and yearly decline for the U.S. Dollar Index.
Other Market's Summary:
S&P (ES) Futures:
Closed at 4870.50, experiencing a 1.09% gain in January 2024.
Nonfarm Payrolls exceeded expectations, leading to a 0.04% gain on the day.
Core Inflation remained steady, resulting in a 0.1% loss.
The Fed maintained rates for the fourth consecutive meeting, leading to a gain of 1.21%.
CoinDesk Bitcoin Futures (BMC):
Closed at $42,342, down 1.7% from the previous month.
On January 10, the U. S. Securities and Exchange Commission (SEC) approved nine spot bitcoin exchange-traded funds (ETFs).
The top three ETFs holding the most bitcoin include Blackrock’s iShares Bitcoin Trust (IBIT) holding 52,025.76 bitcoin, the Fidelity Advantage Bitcoin ETF (FBTC) which holds 46,238.09 bitcoin, and Ark Invest’s ARK 21Shares Bitcoin ETF (ARKB) which holds 14,390 bitcoins.
Mini Crude Futures (QM):
Mini-Crude closed the month at $75.85 with a 5.75% gain.
The market opened at $71.725 and reached a low of $69.30 before reversing to close out the month with a positive gain.
During OPEC’s 52nd Meeting of the Joint Ministerial Monitoring Committee (JMMC), the committee proposed no change to OPEC’s decision to reduce 2.2 million barrels per day (mbpd) from the market for the first quarter.
Market Commentary (ES, BMC, QM):
Detailed market commentary provided for each futures index for our members to review.
Technical indicators, historical volatility, and support/resistance levels used in creating these commentaries.
Upcoming high-impact events highlighted although not exhaustive.
Risk Considerations and Restrictions:
Caution for retail investors regarding risks associated with bitcoin futures.
Warning about potential legal restrictions on distribution in certain jurisdictions.
Disclaimer:
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