The USDX or U.S. Dollar Index is a relative measure of the U.S. dollar (USD)strength against a basket of six influential currencies, which are, the Japanese Yen (13.6%), Euro (57.6%), British Pound (11.9%), Canadian Dollar (9.1%), Swedish Krona (4.2%), and Swiss Franc (3.6%). 

It is also used by market participants such as investors, traders, and corporations as a tool to monitor and hedge against currency risk. Currently, among the exchanges, ICE Futures Singapore offers Mini US Dollar Index® Futures.  

In addition to offering other popular products like Bakkt Bitcoin Cash Settled Monthly Futures, the exchange has seen increased focus on various currencies due to global market volatility. In 2023, the value of the U.S. Dollar has been influenced by factors such as prospects of a global recession, escalating commodity prices due to conflicts, and a multitude of macroeconomic variables.

This article delves into the technical and fundamental aspects of currency markets, providing insights for traders interested in trading USDX futures or USDX.

 

Why Trade in USDX?

The USDX allows traders to take a long or short position on USDX futures or options contracts listed on ICE. More importantly, market participants who wish to express a view on the direction of the greenback can gain exposure to the index through the U.S. Dollar Index (USDX) complex at ICE.

ICE Futures Singapore notes, “the contracts are also utilized by participants who are hedging physical gold holdings… because gold is denominated and traded in U.S dollars, the USDX futures contracts are used by some of these market participants to hedge their gold holdings against moves in the dollar”.

As a clearing member of ICE Clear Singapore, traders that wish to trade through Orient Futures Singapore for any purpose including hedging, arbitrage, risk management, or speculation can leverage our direct market access services.

U.S Dollar Index Futures Contract

The USDX is described by ICE as a geometrically averaged calculation of six currencies weighted against the U.S Dollar. While ICE Futures U.S. offers U.S Dollar Index futures, ICE Futures Singapore offers Mini U.S. Dollar Index Futures. Additionally, the compilation and weighing of the components that forms the index are managed by ICE.

Specifications of the Mini U.S. Dollar Index Futures Contract:

• Minimum price fluctuation of 0.005, which is worth USD $1 per contract.
• Contract months are on March, June, September, and December quarterly cycles.
• Contracts are settled daily against the ICE Futures U.S Dollar Index Futures, while the final settlement price is as published by ICE Futures U.S. on the last Trading Day of the expiry month.   
• Mini U.S. Dollar Index contracts are traded electronically on the ICE Futures Singapore electronic trading platform from Monday to Friday, 8:30 AM - 6:00 AM. SGT.
• Contract Symbol: SDX

 

USDX Fundamentals and Commentaries

According to ICE’s March 2023 USDX Report, the index plunged 2.67% in March to close at 102.19, after the second worst performing month since July 2020. Nonfarm payrolls data surprised the markets with 311,000 new jobs created during February, exceeding market forecasts of 205,000 jobs. Core inflation continues to ease while Fed raised interest raised by 25 basis points in March.

Manufacturing and Retail

ISM Manufacturing PMI data released for February on March 1 showed further contraction in manufacturing activity at 4.77.

Apart from manufacturing, based on the weekly report from Shanghai Orient Futures dated 16 April, it is reported that U.S. retail sales for March, fell by 1% month-on-month, lower than expected, indicating continued pressure on consumers ability to spend due to high inflation and high-interest rates. -Weekly Research Report 16/04/2022 (东证期货周度报告-贵金属,美国核心通胀居高不下，加息预期重燃)

CPI

on March 14, ICE’s report indicates that the U.S. Dollar Index® bounced off the lower boundary of the daily Bollinger Bands as inflation data was announced. The latest inflation figures showed the pace of inflation continued to ease as Consumer Price Index (CPI) data for all items 12-month ending February rose by 6.0%, the lowest 12-month increase since September 2021.

Shanghai Orient Future’s April report noted U.S. March CPI fell to 5% year-on-year and 0.1% month-on-month, lower than expected from previous value, but core CPI rose from 5.5% to 5.6% due to support from rent and service costs, with rent costs rising by 0.6% month on month.  -Weekly Research Report 16/04/2023 (东证期货周度报告-贵金属,美国核心通胀居高不下，加息预期重燃)
 

Federal Reserve

FED chair Jerome Powell has noted that the central bank “would be prepared to pick up the pace and size of future interest rates rises to tame inflation especially after the latest stronger than expected data.”

 It is also inferred from the minutes of the Federal Reserve's March rate meeting that the economy will experience a mild recession at the end of the year before monetary policy starts to ease, creating a difficult backdrop for risk assets.. Weekly Research Report 16/04/2023 (东证期货周度报告-贵金属,美国核心通胀居高不下，加息预期重燃)
 

Start Trading With Orient Futures Singapore  

Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.

Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and ICE Futures Singapore.

We provide premium customer service at an affordable cost to all our clients. Our team will be there for you 24 hours on trading days to provide a one-stop portal for all your trades, with simple processes and an intuitive user interface that has low or near-to-zero latency.