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US Dollar Index in Forex Trading

What is US Dollar Index (DXY)?

You’ve undoubtedly heard of the popular Dow Jones and S&P 500. But you also heard of the index for the US Dollar this is used to calculate the strength or weakness of the US Dollar (USD) against a basket of other currencies, as well as the aforementioned price indices.

This index is very useful against the displacement of a variety of highly exchanged currencies in the creation of the US Dollar. Currency Basket contain EUR, GBP, JPY, CAD, SEK and CHF. It is highly inclined towards the euro, as this unit constitutes 57.6 percent of the basket weight.

Dollar index

It’s used by experienced Forex traders to diversify spot trades in the USD. The index is often used to trade EURUSD as the pair and DXY are going in opposite directions. When EURUSD increases, then the USDX will decline. You should be aware of that fact. And given that the US dollar index is heavily weighted to the EUR, it may represent the euro ‘s movement on the Forex market to some degree.

Suppose you trade EURUSD chart, the pair is moving in upward trend, so DXY will moving toward downward trend because both are in opposite direction, the index must be in a downward trend. If this finding is verified so you can take a long trading position on the EURUSD.

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Kevin The Forex Scalper

Welcome to my author blog. With over 12 years of experience in the financial markets, Trading is more than a profession for me; it's a passion that has fueled my curiosity and determination. Over the years, I've explored various trading strategies, dabbled in different asset classes, and navigated through the ever-evolving landscape of technology and innovation. Through it all, I've witnessed firsthand the transformation of the financial industry. My mission is to share the wealth of knowledge I've gained over the years with you, my fellow traders and aspiring investors. Whether you're a seasoned pro looking for fresh perspectives or a newcomer eager to understand the basics, you'll find something valuable here.

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