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US DOLLAR CURRENCY INDEXUS DOLLAR CURRENCY INDEXUS DOLLAR CURRENCY INDEX

US DOLLAR CURRENCY INDEX

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Understanding the U.S. Dollar IndexThe U.S. Dollar Index (USDX) is a critical tool for traders, investors, and economists alike, as it provides a measure of the overall strength of the U.S. dollar relative to a basket of major foreign currencies. The image shared highlights the core elements of the U.S. Dollar Index: its history, composition, calculation, and its economic implications. In this article, we’ll delve into what the USDX is, why it matters, and how you can trade or invest in it. What Is the U.S. Dollar Index? The U.S. Dollar Index is a numerical representation of the U.S. dollar's value compared to a basket of foreign currencies. It serves as a benchmark to measure the dollar's strength in the global economy. The USDX is calculated using exchange rates and reflects the dollar’s performance against six major world currencies. The index is maintained and traded in financial markets, offering investors a way to speculate on or hedge against changes in the dollar’s value. A rising USDX indicates a stronger dollar, while a declining USDX signals a weakening dollar. History of the USDX The U.S. Dollar Index was established in **1973** by the Intercontinental Exchange (ICE) shortly after the Bretton Woods Agreement was dissolved. This agreement, which pegged global currencies to the U.S. dollar and gold, collapsed, leading to floating exchange rates. The initial value of the USDX was set at 100. Over the years, the index has fluctuated based on the economic conditions, monetary policies, and geopolitical events influencing the U.S. dollar’s demand and supply. Its all-time high was approximately 164.72 in 1985, while its lowest was 70.698 in 2008. Why Does the Strong Dollar Matter? A strong dollar impacts the global economy in numerous ways: 1. Trade Impacts: A stronger dollar makes U.S. exports more expensive for foreign buyers, potentially reducing demand for American goods. Conversely, imports into the U.S. become cheaper, which can benefit American consumers. 2. Economic Implications: For emerging markets, a strong dollar increases the burden of dollar-denominated debt, as countries must repay loans in a currency that has gained value. 3. Investment and Market Effects: A rising dollar tends to attract foreign investors to U.S. assets like Treasury bonds, increasing demand for the currency further. However, it can also pressure commodities like gold and oil, which are priced in dollars. Understanding the dollar’s strength through the USDX helps businesses, traders, and governments make informed financial and economic decisions. What Does the Dollar Index Tell You? The Dollar Index provides insights into: Market Sentiment: A rising USDX signals increased confidence in the U.S. economy, while a declining index indicates weaker sentiment. Monetary Policy Expectations: The USDX often moves in anticipation of Federal Reserve policy changes, such as interest rate hikes or cuts. Global Economic Health: The index indirectly reflects how the global economy interacts with the dollar, as it is the world’s primary reserve currency. Traders use the USDX as a tool to gauge the relative strength of the dollar in real-time, helping them make informed decisions in currency, commodity, and equity markets. What Currencies Are in the USDX Basket? The U.S. Dollar Index measures the dollar’s performance against a **basket of six major currencies**, each with a specific weight in the calculation: 1. Euro (EUR)~57.6% weight 2. Japanese Yen (JPY)~13.6% weight 3. British Pound (GBP)~11.9% weight 4. Canadian Dollar (CAD)~9.1% weight 5. Swedish Krona (SEK)~4.2% weight 6. Swiss Franc (CHF)~3.6% weight The dominance of the euro in the basket highlights the close economic ties between the U.S. and the European Union. Other currencies in the basket represent major global economies and trading partners. How to Invest or Trade in the Dollar Index There are several ways to invest in or trade the USDX: 1. Futures and Options: The USDX is traded as a futures contract on the Intercontinental Exchange (ICE). Futures and options on the USDX allow traders to speculate on the dollar’s movements or hedge against currency risks. 2. Currency Pairs: Trading major currency pairs, such as EUR/USD or USD/JPY, offers indirect exposure to the dollar index. For instance, if the USDX is rising, the EUR/USD pair is likely falling. 3. Exchange-Traded Funds (ETFs): Some ETFs track the performance of the U.S. Dollar Index, providing an accessible way for investors to gain exposure without directly trading futures. 4. Forex Market Spot forex trading allows traders to speculate on the dollar’s strength against specific currencies in the USDX basket. 5. Commodities: The USDX indirectly affects commodities like gold and oil. A strong dollar typically puts downward pressure on these assets, offering additional trading opportunities. Limitations of the U.S. Dollar Index While the USDX is a valuable tool, it has some limitations: Narrow Currency Basket: The index only measures the dollar against six currencies, primarily from developed markets. It doesn’t account for emerging market currencies like the Chinese yuan, which are increasingly important in global trade. Euro Dominance: The euro’s large weighting means the index heavily reflects the euro-dollar relationship, potentially overlooking other factors influencing the dollar’s global strength. Static Composition: The basket has not been updated since its creation, which means it doesn’t fully reflect changes in the global economic landscape over the past decades. Ending thoughts The U.S. Dollar Index is a vital tool for understanding and navigating the global financial markets. By tracking the dollar’s performance against a basket of major currencies, the USDX provides insights into market sentiment, monetary policy expectations, and economic trends. Whether you’re an investor, trader, or policymaker, understanding the USDX can help you make informed decisions. If you’re looking to invest or trade the dollar index, there are multiple avenues to explore, from futures contracts and ETFs to spot forex trading. However, always consider the limitations of the index and ensure your strategies account for its biases and composition. The U.S. dollar remains the cornerstone of the global economy, and the USDX is your window into its strength and influence.
TVC:DXYEducation
by pow_removetheguesswork
Bearish Divergence Between DXY US Dollar Index & RSIThe DXY is butting up against a zone of significant resistance, and a bearish divergence between the index and the relative strength index suggests that buying pressure is fading here. A sharp correction in the dollar could have significant implications for gold, silver and other commodities. Today we saw a rally in the DXY on a safe haven bid following news of escalation in Ukraine. If a major conflict between NATO and Russia really does break out, investors may learn the hard way that fiat currencies in fact do not make the best safe havens.
TVC:DXYShort
by smartsilverstacker
DXY Will Move Lower! Short! Here is our detailed technical review for DXY. Time Frame: 1h Current Trend: Bearish Sentiment: Overbought (based on 7-period RSI) Forecast: Bearish The price is testing a key resistance 106.561. Taking into consideration the current market trend & overbought RSI, chances will be high to see a bearish movement to the downside at least to 106.415 level. P.S We determine oversold/overbought condition with RSI indicator. When it drops below 30 - the market is considered to be oversold. When it bounces above 70 - the market is considered to be overbought. Like and subscribe and comment my ideas if you enjoy them!
TVC:DXYShort
by SignalProvider
1
US DollarLooking at historical events, Specially heading into 2025 as a year where we could see sharp declines in the stock market as rebalancing commences early in 2025. The US dollar has enjoyed a lot of support over the last couple of months. and could still enjoy more, but as a long term investor and position trader im not interested in buying USD at these levels as COT index is showing imminent signs of reversals coming. Coupled with Seasonality it could happen in December. ill await clearer shifts on lower time frames for an entry. retail traders also are 80% long EURUSD, the moment they start selling i will buy and hold.
TVC:DXYShort
by Mike_SnD
1
U.S. Dollar IndexHello to all dear traders. I apologize for the delay in presenting the analyses, as I have transitioned my analysis to the daily timeframe, which has allowed me to examine the market with greater depth and precision. Currently, we are examining the chart of the DXY (Dollar Index). Based on previous forecasts, the significant growth we are witnessing in this chart was entirely anticipated. In the prior price leg, where we observed the formation of a Change of Character (CHoCH), my strategy focused on the order block extreme, and as we can see, the upward momentum of the dollar has continued, bolstered by relevant news. It is expected that we will witness a Break of Structure (BOS) on the daily timeframe, followed by a price correction. The key point is that if the price reaches the specified order flow or order block, these levels represent excellent entry points for buying the dollar. Therefore, it is advisable to look for a timely entry for a buying opportunity at this juncture, which I have clearly marked on the chart. I anticipate that the dollar will continue to rise; however, entering a trade will only be viable if the price reaches these target levels. This chart has been presented in a very clear and understandable manner, designed for mapping and capitalizing on opportunities for you, esteemed traders. Wishing you all great success! Thank you very much, Fereydoon Bahrami "A retail trader in the Wall Street trading center (Forex)."
TVC:DXY
by fereydoon1199
1
Dxy down setup for allThe US Dollar (USD) holds ground at rather elevated levels on Monday with a very calm start of the week, with the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, slightly in the red near a fresh year-to-date high reached last Thursday above 106.50. The main driver for the currency on Monday is the green light from the Biden Administration on Sunday for Ukraine to use long-range US missiles to target Russian infrastructures within Russian borders, just ahead of the G20 meeting in Rio De Janeiro this Monday. The US response comes after Moscow deployed nearly 50,000 troops to Kursk, the southern Russian region. Reporting on that, “the change comes largely in response to Russia's deployment of North Korean ground troops to supplement its own forces, a development that has caused alarm in Washington and Kyiv,” Reuters said.,.
TVC:DXYShort
by KingForex078
Market News Report - 17 November 2024The US dollar is showing no let-up as it was, yet again, a bullish force. While there were up-trending currencies like CHF and JPY, USD is definitely stealing the show. But what do the fundamentals say for the greenback and the other currencies? Let's cover them in more detail in our latest market news report. Market Overview Below is a brief technical and fundamental analysis breakdown for all major currencies. US dollar (USD) Short-term outlook: weak bearish. As predicted by STIR (short-term interest rate) markets, the Fed cut the interest rate by 25 basis points/bps from 5.00% to 4.75%. While labour data was down recently, this was mainly due to the impact of US hurricanes and labour disputes with Boeing. While there is some mildly positive economic data, the bearish bias remains for USD, with STIR pricing indicating one more 25 bps cut in December. However, Powell stated on the 14th of November that the economy isn't giving signals that the Fed must be in a rush to cut rates. The Dixie continues to head north and is very close to the key resistance at 107.348. Meanwhile, the key support is far away at 100.157, which will remain untouched for some time. Long-term outlook: weak bearish. A noteworthy point about the recent Fed meeting is the removal of the line "the committee has gained greater confidence that inflation is moving sustainably towards 2 percent." Finally, Powell also clarified that the US elections won't affect their decisions going forward. The big takeaway is that the Fed will see how fast/far they should cut rates. Furthermore, any big misses in economic data, such as labour and GDP (Gross Domestic Product), would support the expectation of cuts. Euro (EUR) Short-term outlook: bearish. The short-term interest rate (STIR) markets were predictably accurate as the European Central Bank (ECB) cut the interest rate last month. However, they remain data-dependent on what to do in the future (although they are quite concerned about slow growth). Short-term interest rate markets have indicated an 84% chance of a rate cut in December. Also, we have seen weaker economic data across various European nations (although the Eurozone Gross Domestic/GDP growth was above expectations). Another concern is that a protectionist US policy (with Donald Trump winning the election) could impact trade in the Eurozone, suggesting the potential for lower growth due to tariff risks. The euro has clearly broken the key support we mentioned previously (1.07774) - the next area of interest is 1.04485. Meanwhile, the key resistance remains far higher at 1.12757. Long-term outlook: bearish. The latest rate cut and the avoidance of indicating a clear future move for the December meeting are among the key down-trending factors. However, any improvements in economic data (according to the ECB) would be a turnaround. The threat of a fresh trade tariff with Trump is hugely influential and may cause the euro to be continuously sold off. British pound (GBP) Short-term outlook: bearish. The Bank of England (BoE) cut the bank rate from 5% to 4.75% as anticipated. The language indicates they need to be restrictive and a "gradual approach" to policy easing. Governor Bailey also highlighted that rates will probably be brought down cautiously. Despite this, we saw a slight increase in GBP/USD. This may be in line with the BoE's slightly hawkish attitude due to recent inflationary pressures. Speaking of which, watch out for the new YoY inflation rate for GBP scheduled for Wednesday. Like other dollar pairs, GBP/USD has looked bearish for some time. The nearest key support is at 1.26156 (which it has just touched), while the resistance target is 1.34343. Long-term outlook: weak bearish. The BoE sees inflation (its main concern currently) as being stickier for longer. Bailey wishes to see it down to 2%. This is a moderately hawkish hint. Overall, incoming CPI (and other economic) data will be important for the British pound. Japanese yen (JPY) Short-term outlook: bullish. Unlike in July this year, the Bank of Japan (BoJ) recently kept the interest rate the same. So, our outlook remains largely unchanged. However, a rise in USD/JPY could raise the possibility of the BoJ's intervention. ​​Governor Ueda of the BoJ noted not long ago that despite domestic economic recovery, recent exchange rate movements have reduced the upside risk of inflation (which has been on an upward trajectory). As recently as 31 October 2024, Ueda also stated that hikes would continue if the central bank's projections were realised. Interestingly, you can diarise his upcoming speech on Thursday. The 139.579 support area is proving quite strong, boosting the yen since mid-September. Still, the major resistance (at 161.950) is too far for traders to worry about. Long-term outlook: weak bullish. Lower US Treasury yields are one potential bullish catalyst for the yen (the opposite is true). Inflation pressures and wage growth also provide the potential for upward momentum. We should also consider that the dovish tendencies of other major central banks and worsening US macro conditions are JPY-positive. Still, as a slight downer, near-term inflation risks subsiding (according to the BoJ) reduce the urgency for a rate hiking cycle. Australian dollar (AUD) Short-term outlook: weak bullish. The Reserve Bank of Australia (RBA) kept its interest rate unchanged last week, marking the eighth consecutive hold. They emphasised that policy will remain restrictive until inflation moves toward its target. The RBA also lowered its GDP forecasts while the labour market remains tight. As with GBP/USD, the Aussie is currently more of a seller's market than a buyer's one. The key resistance level lies ahead at 0.69426, while the major support remains at 0.63484. Despite this bearish setup, consider the interesting dynamic with the opposite fundamentals of AUD and USD in your overall analysis. Long-term outlook: weak bullish. While the RBA suggests that rate hikes won't be necessary going forward, it hasn't ruled anything out. Governor Bullock recently mentioned that they would act if the economy dropped more than desired. It's crucial to be data-dependent on the Aussie, especially with core inflation as the RBA's key focus area. Also, the Australian dollar is pro-cyclical, with particular exposure to China's geopolitics. Trump's recent win in the US election means the prospect of trade tariffs with China has increased (potentially causing headwinds for AUD). New Zealand dollar (NZD) Short-term outlook: bearish. Unsurprisingly, the Reserve Bank of New Zealand (RBNZD) cut its interest rate by 50 bps recently and sees further easing ahead. This affirms another cut next month of potentially the same magnitude. Furthermore, the central bank is confident that inflation will remain in the target zone, adding more impetus to the bearish bias. Due to the rate cut, the Kiwi has been on a downward spiral, proving the strength of the major resistance level at 0.63790. Conversely, the major support is at 0.58498, an area which it has just touched. It will be interesting to see how it reacts this week. Long-term outlook: bearish. The central bank's latest dovish stance (where it cut the interest rate) firmly puts the Kiwi in a 'bearish bracket.' A 50bps rate cut is predicted for the meeting later this month. They also revised the OCR rates lower and signalled steady winnings in the inflation battle. As with the Aussie, potential headwinds for NZD are considered due to the trade tariff issues between China and the United States. Canadian dollar (CAD) Short-term outlook: bearish. The Bank of Canada (BoC) unsurprisingly delivered a 50 bps cut on Wednesday. Further cuts remain on the cards, with the long-term target being 3%. The BoC is signalling victory over inflation due to the cuts, with Governor Macklem suggesting that they would probably cut further until they achieve the optimal low inflation. In their words, 'stick the landing.' Overall, the bias remains bearish - expect strong rallies in CAD to find sellers. While the short-term fundamental biases of USD and CAD are bearish, CAD is the weakest on the charts. USD/CAD has finally exceeded the key resistance at 1.34197. We have to go onto a higher time frame for the next target. For now, let's see what happens around this area. Meanwhile, the key support lies far down at 1.33586. Long-term outlook: weak bearish. Expectations of a rate cut remain the focal point, with STIR markets indicating a 67% chance of a 25 bps cut and a 33% chance of a 50 bps cut in December. The Bank of Canada has recognised the lower economic growth, and Macklem wishes to see this improve. Furthermore, any big misses in upcoming GBP, inflation, and labour data would send CAD lower. Still, encouraging oil prices and general economic data improvement would save the Canadian dollar's blushes - the opposite is true. Swiss franc (CHF) Short-term outlook: bearish. STIR markets were, as usual, correct in their 43% chance of a 25 bps rate cut (from 1.25% to 1%) recently. In the Sept. 26 meeting, the Swiss National (SNB) indicated its preparedness to intervene in the FX market and further rate cuts in the coming quarters. The central bank's new Chair (Schlegel) said they "cannot rule out negative rates." Finally, the October CPI came in weak at 0.6% (another poor result, as for the September data). Still, the Swiss franc can strengthen during geopolitical tensions like a worsening Middle East crisis. USD/CHF keeps rising steadily towards the major support level at 0.83326, while the major resistance level is at 0.92244. Long-term outlook: weak bearish. The bearish sentiment remains after the last SNB meeting, while inflation is being tamed with lower revisions. We should also remember that the SNB's intervention prevents the appreciation of the Swiss franc. The new chairman is more keen to cut rates than his predecessor, Jordan. The SNB aims for neutral rates between 0 and 0.50% (currently at 1%). However, STIR markets only see a 33% chance of a 50 bps cut next month. Conclusion In summary: The US dollar remains one of the key currencies to watch, given the recent elections and Trump's potential to affect trade relations with the likes of Australia and New Zealand. Inflation is a common theme among central banks. Watch out for the new YoY inflation rate for GBP on Wednesday. Our short and long-term fundamental outlooks remain unchanged from the last few weeks. As always, hope for the best and prepare for the worst. This report should help you determine your bias toward each currency in the short and long term.
TVC:DXY
by CityTradersImperium_CTI