DOLLAR INDEX DXYThe U.S. Dollar Index (DXY) is a measure of the value of the United States dollar (USD) relative to a basket of six major foreign currencies. It reflects how strong or weak the dollar is compared to these currencies collectively. The index was created by the Federal Reserve in 1973
The six currencies included in the basket and their approximate weightings are:
Euro (EUR): 57.6%
Japanese Yen (JPY): 13.6%
British Pound Sterling (GBP): 11.9%
Canadian Dollar (CAD): 9.1%
Swedish Krona (SEK): 4.2%
Swiss Franc (CHF): 3.6%
The DXY is calculated as a weighted geometric average of the dollar's exchange rates against these currencies. When the dollar strengthens against this basket, the index rises; when it weakens, the index falls.
The index is widely used by traders, investors, and economists to gauge the overall strength of the U.S. dollar in global currency markets and to inform trading and economic decisions.
In essence, the Dollar Index provides a standardized barometer of the U.S. dollar's value against its major international trading partners' currencies.
The U.S. Dollar Index (DXY) is trading near 98.684 of August 1, Friday market close.
July saw the DXY record its first monthly gain in 2025 (rising nearly 1%) as a a result of the demand floor on ascending trendline acting as dynamic support .but selling has resumed at the start of August on ADP data report, the current supply roof presents resistance to upswing capping gains on economic outlook and immigration enforcement concern.
Key Fundamental Drivers (August 2025):
Fed Policy & Inflation: The Federal Reserve kept rates steady at 4.25–4.50% in July, but persistent inflation (core PCE up to 2.8% YoY in June) and the impact of new U.S. tariffs are keeping rate cuts on hold for now.
Tariffs & Trade Policy: Fresh, globally-applied U.S. tariffs announced at the end of July have heightened risk aversion, helped the dollar find support, and stirred inflation concerns—as import price increases feed into core inflation data.
Interest Rate Differentials: While the Fed holds rates high, other central banks (especially the ECB and BOE) are signaling further easing. The resulting policy divergence still gives the dollar some support, but large inflows into alternative markets (e.g., eurozone equities, gold, yen) have also pressured the greenback.
Safe-Haven Flows: Risk-off sentiment amid trade tension and global policy uncertainty continues to prompt investors to seek the relative safety of the dollar, limiting its downside.
Composition: The DXY measures the value of USD relative to a basket of currencies: euro (57.6%), yen (13.6%), pound (11.9%), Canadian dollar (9.1%), Swedish krona (4.2%), and Swiss franc (3.6%).
The path ahead depends on upcoming U.S. inflation prints, additional Fed commentary, and how global markets react to ongoing trade disputes and central bank moves.
Longer term,
The DXY remains under pressure at the start of August 2025 but is showing tentative signs of stabilization just below the key 100 mark. The trend will hinge on Fed policy, global inflation data, and the impact of new tariffs on both inflation and global risk appetite. If buying breaks and close above weekly resistance roof then 104-103 can be reclaimed.
trading is 100% probability ,manage your risk and know that any key level can fail.
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