US dollar nosedives in last few trading days before 2024

Thursday saw a sharp decline in the value of the US dollar following the Richmond Manufacturing Index. The US bond market is witnessing significant purchasing while the equity markets remain stable.

After the US opening bell, the US Dollar Index has experienced a wild ride and is almost flat. On Thursday, the US dollar continued its downward trend in Asian trading. The US Dollar Index’s starting deficit versus Wednesday’s finish did not bode well for the US currency. The DXY has totally reversed earlier losses and is flat for this Thursday, flirting with a burst back over 101, despite the fact that it opened minutes after the US opening bell.

Regarding the economy, the report on Jobless Claims provided more backing for the heavily depreciated US dollar. The initial and continuing claims both increased, but the prior figures were decreased. This indicates that, in comparison to where it is currently, the starting point for this week’s increase in jobless claims is narrower and lower.

The initial number of Jobless Claims was revised from 205,000 to 218,000, while the initial 206,000 was still 206,000. Even though the previous figure was 1,865,000, the number of continuing claims decreased to 1,875,000. Thus, a decrease from the prior figure and a new print that is consistent with expectations.

Simultaneously, Wholesale Inventories showed a projected decline from -0.4% to -0.2%. November saw a change in the goods trade balance from -89.8 billion USD to -90.3 billion USD.

Despite moving to 0% on the monthly change at 15:00, compared to -1.2% on the previous month, Pending Home Sales did not move the market. The US Treasury has allocated a 7-year Note and a 4-week bill, and it is going to the markets to get some cheaper funding.

China is the lone exception to the general downward trend in stocks. After the Chinese regulator reversed course on previous remarks about a crackdown on online gaming and gambling enterprises, the Hang Seng and the Shenzhen Index both saw gains of more than 2%.

Markets are pricing in an 83.5% possibility that the Federal Reserve will maintain interest rates at its meeting on January 31, according to the CME Group’s FedWatch Tool. Approximately 16.5% anticipate that the first cut will occur already. The sharp decline in expectations and subsequent dismal reading of the Richmond Manufacturing Index on Wednesday precipitated the recent upswing in favour of a rate decrease.

The benchmark US Treasury Note for ten years is currently trading at 3.82%, which is lower than it was on Thursday. Technical Analysis of the US Dollar Index: DXY can close 2023 over 100.

Thin trading desks and investor withdrawals have caused markets to focus on the US dollar, which is causing the US Dollar Index to decrease in US rates. The first upward resistance is located close to the December 21 peak of 101.78. The 200-day Simple Moving Average (SMA) around 103.45 may be the final obstacle before further upward, and the DXY may challenge the falling trend line around 103.00. A catalyst is needed for the Greenback’s recovery, and the 200-day SMA at 103.45 might serve as a solid final barrier to further gains.

On the downside, the critical level at 101.70, which was the low of August 4 and 10, has now disappeared and is no longer a reliable source of support. The current level, which is close to 100.82 and corresponds with the lows from February and April, may still have some significance and hold for this Thursday. Nothing will stop DXY from reaching the sub-100 zone should that level snap.