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US Dollar Index

US Dollar Index

Thomas Long, Course Instructor

This chart of the US Dollar Index is a good example of what I mean.

usd

While the FX markets offer the opportunity to trade the USD against a variety of individual currencies, this chart offers a more general view of the state of the USD as it is compared to a basket of currencies. When looking for trades in the USD pairs, I often check this chart out just to make sure that I am seeing the USD strength/weakness in its purest form. Right now the USD is strong and has been since the beginning of December. So this gives me confidence that trending moves, like the downtrend of the EUR/USD is based not only on the EUR weakness, but real underlying strength in the USD. The uptrend continues on the USD as it appears poised to move up to a new recent high, so traders would most likely increase their chance of success by looking to take advantage of this strength rather than its relative weakness against a stronger currency. An example would be the recent sideways trading in the AUD/USD, it may not be based on AUD weakness, but rather a USD that is continuing to gain strength.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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