US Dollar Outlook on the Last Trading Day of 2023

US Dollar Outlook on the Last Trading Day of 2023. US Dollar steady ahead of US opening and Chicago PMI.

Introduction: US Dollar Outlook on the Last Trading Day of 2023

As the curtain falls on 2023, the US Dollar (USD) finds itself trading in a relatively steady manner on the last Friday of the year.

Reflecting on its performance throughout the year, the Greenback has experienced a marginal loss of approximately 3% Year-To-Date on the US Dollar Index (DXY) chart since January’s opening.

Looking forward to 2024, the key question revolves around whether markets have preemptively priced in rate cuts by the US Federal Reserve or if the Fed faces challenges maintaining control without making a policy error.

Market Expectations and Economic Indicators: US Dollar Outlook on the Last Trading Day of 2023

Traders keen on seizing potential opportunities can focus on the Chicago Purchase Managers Index (PMI) scheduled for release on this Friday.

The Jobless Claims numbers from Thursday already triggered a modest turnaround for the DXY.

If the Friday PMI numbers remain above 50 and surpass expectations, the Greenback may recuperate some losses incurred earlier in the week.

Daily Digest Market Movers: US Dollar Outlook on the Last Trading Day of 2023

The last data point for 2023, the Chicago Purchase Managers Index, is anticipated to be released around 14:45 GMT. An expected decline from 55.8 to 51 could impact the US Dollar’s trajectory.

A drop below 50 would signify contraction and pose a substantial negative impact on the US Dollar.

Conversely, beating expectations or surpassing the previous reading might lead to a robust US Dollar rally.

Geopolitical and Market Highlights: US Dollar Outlook on the Last Trading Day of 2023

On the geopolitical front, Russia has initiated a new missile offensive against Ukraine, intensifying tensions with key cities under bombardment.

In the US, former President Donald Trump’s return to the primary ballot in Colorado contrasts with his exclusion in the state of Maine for the March Primaries.

Equities globally are striving to secure last-minute gains, with Japan’s Topix closing up nearly 28% for 2023 and Germany’s Dax reflecting a 20% return.

However, China’s Hang Seng Index concluded 2023 with a 13.82% decrease.

In the US, futures are flat for the last trading day of the year, pausing the Christmas rally before entering the New Year.

The Dow Jones, S&P 500, and Nasdaq have shown substantial gains for 2023.

Market Sentiment and Rate Expectations: US Dollar Outlook on the Last Trading Day of 2023

Market sentiment, reflected in the CME Group’s FedWatch Tool, indicates an 83.5% likelihood that the Federal Reserve will maintain interest rates at its January 31 meeting.

Approximately 16.5% of market participants anticipate an interest rate cut.

The benchmark 10-year US Treasury Note, trading near 3.87%, has experienced a slight upside squeeze since Thursday.

Technical Analysis of the US Dollar Index: US Dollar Outlook on the Last Trading Day of 2023

The US Dollar Index is exhibiting a change of sentiment on the last day of 2023. Traders short on the Greenback may witness a rally as demand for the US Dollar increases, potentially signaling a clean slate for 2024.

The first upside resistance is anticipated near 101.78, at the low of December 21, with a potential test of the descending trend line near 103.00.

The 200-day Simple Moving Average (SMA) near 103.45 represents a formidable last resistance before further upside potential.

To the downside, the pivotal level at 101.70 has lost its significance, and the new support near 100.82 may hold relevance. However, a breach of this level could pave the way for the DXY to approach the sub-100 region.

Conclusion: US Dollar Outlook on the Last Trading Day of 2023

As the final trading day unfolds, the US Dollar stands at a critical juncture.

Traders should closely monitor economic indicators, geopolitical developments, and market sentiment to navigate potential shifts in the US Dollar’s trajectory.

The outlook for 2024 hinges on factors such as the Fed’s policy decisions and global geopolitical events, influencing the Greenback’s performance in the coming year.