U S. Dollar Index DXY Overview DXY

As a stronger currency can reduce demand for exports to other countries that pay for the goods with relatively weaker currencies, some governments pursue policies to keep down their nation’s currency value. Conversely, countries that import heavily favor a stronger currency to reduce the foreign exchange cost of paying for those imports. CFD trading is leveraged, which means you can gain exposure to a large position without having to commit the full cost at the outset.

  • Dollar Index (DXY), you’ll need to open an account with a derivatives provider or a futures broker.
  • The index was introduced after the Bretton Woods Agreement, which meant the dollar was no longer backed by gold.
  • The ICE Exchange symbol for the value of the underlying Dollar Index (sometimes called the cash or spot index) is also DX (without a month or year code), although different data providers may use different symbols.

In addition, traders have the opportunity to earn on its changes by opening transactions within CFD contracts. Both technical analysis and fundamental analysis can be recession proof stocks easily applied to the DXY while trading. However, you should pay attention to major factors like interest rates, monetary policy decisions, and market risk mode.

Trade DXY US Dollar Index – DXY CFD

The calculation takes the midpoint prices between the bid and offers for each currency. The prices for the DXY futures contracts are set by the market and reflect differentials in interest rates between the US dollar and the component currencies. The value of the DXY Index is calculated in real-time approximately every 15 seconds based on spot prices of the constituent currencies.

The prices of the DX futures contracts are set by the market, and reflect interest rate differentials between the respective currencies and the U.S. dollar. The index is particularly useful for traders in the bond, currency and gold markets. For example, a strong USD is usually correlated with falling gold prices, which means that gold traders are very interested in a break out on the dollar even though they may not be trading it directly. Thanks to this list, it can be determined that the change in the EUR/USD exchange rate has the greatest impact on the dollar index, and the least — USD/CHF.

The index climbed from the record low of 70.70 in March 2008 prior to the crisis to 88.58 by February 2009. As a global currency benchmark, DXY trading hours run 21 hours a day Sunday – Friday on the ICE platform, with the hours depending flag and pennant patterns on the time zone. Dollar Index in 1985, ICE compiles, maintains, determines, and weights the components of the U.S. However, if you think that the dollar is likely to decline in 2010 the second ETF is UDN which invests against the dollar.

DXY: Dollar Index Trims Weekly Gains in Half. Is the Reversal Finally Coming?

Buying 100 shares of UUP means the trader expects the dollar to outperform the six constituent currencies. The dollar index can be used as an analytical tool for making forecasts with major pairs – EURUSD, GBPUSD, USDCHF, AUDUSD, USDCAD, USDJPY – and more exotic pairs with USD. If the interest rate rises, then, other things being equal, the yield of American Treasuries increases. Here, other conditions mean the market value of the bonds themselves — they could partially “adjust” in advance to future rate changes and adjust the yield. For understanding, let’s imagine an example that there are 1000 units of USD and 10,000 units of EUR. Under other conditions, it means that the weakening of the dollar does not occur against the background of an even greater weakening of other currencies.

What is Spread In Forex and How Does It Work?

Additionally, it is prudent to keep individual trades to a maximum of 1% of the trading account. This is a simple way to ensure that only high probability trades are entered into and has the added benefit of absorbing losses along the way without jeopardising the trading account. Trading the Dollar Index (DXY) is a valuable skill as it’s one of the most popular currency indexes worldwide. In this guide we explore the best tips and strategies for using the dollar index to trade forex, including an overview of the Dollar Smile Theory and Dollar Index trading hours. Any information contained in this site’s articles is based on the authors’ personal opinion.

The exception is that the attractiveness of the economy is characterized not only by the interest rate. The more dollars are printed, the weaker their strength, all other things being equal. The weakening of the dollar means a decline in DXY, that is, a change, for example, from 92.0 to 89.0.

Dollar Index trading hours

These articles shall not be treated as a trading advice or call to action. The authors of the articles or RoboForex company shall not be held liable for the results of the trades arising from relying upon trading forex fibonacci strategy recommendations and reviews contained herein. A trend is a direction in which the market or the price of an instrument is moving. Trends can be upward, downward or sideways and are common to all types of markets.

How to Use the US Dollar Index (DXY) in Forex Trading?

You agree that LearnFX is not responsible for any losses or damages you may incur as a result of any action you may take regarding the information contained on this website. The regulated signals offered by this website are provided by a third-party service provider and you understand that any losses you may experience from using these signals are entirely at your own risk and liability. The global economic situation today largely depends on the state of the American economy. The US dollar index is one of the important indicators that can be used for trading and analysis. After March 2020, the weakening of the dollar was highly predicted due to a sharp increase in the money supply in the United States. The value of the US Dollar Index fell in 2020 after the initial flight to safety, as the US Federal Reserve policy to reduce interest rates to record lows and stimulate investment reduced the value of the dollar.

An index value of 120 suggests that the U.S. dollar has appreciated 20% versus the basket of currencies over the time period in question. Simply put, if the USDX goes up, that means the U.S. dollar is gaining strength or value when compared to the other currencies. When investors become risk averse they will often turn to “safe havens” such as gold, or in this case, the US Dollar.

The index has gained its popularity among FX traders as a gauge of the value of the dollar against other currencies, helping traders to analyze more currency pairs using only one tool. Due to the high volumes of trading, the spreads or commissions for the DXY can be competitive. The US Dollar Index (DXY) measures the value of the dollar against a basket of six major currencies, based on the exchange rates of these currencies.

The dollar index was first created by the Federal Reserve in 1973 to track the value of the dollar after the collapse of the Bretton Woods Agreement and the abandoning of the gold standard. That allowed the value of the dollar to float freely after being fixed at $35 per ounce of gold under the Bretton Woods Agreement. Investors buy into the Dollar once more, causing an increase in the value of the US Dollar. It is a geometric average, rather than an arithmetical average because each currency is multiplied by its respective percentage weight. The greenback posts five winning days in a row, boosted by possible inflation resurgence.Another day, another dollar gain. The greenback posts five winning days in a row, boosted by possible inflation resurgence.

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