U.S. Dollar Index - USDX
U.S. Dollar Index (USDX) was introduced in March 1973, when the Bretton Woods system ceased to exist. The index shows the ratio of U.S. dollar against a basket of six major world currencies - the euro is (EUR), Yen (JPY), British Pound (GBP), Canadian dollar (CAD), Swedish krona (SEK) and Swiss franc (CHF). As part of the basket each currency has its own weight:
EUR - 57,6% JPY - 13,6% GBP - 11,9% CAD - 9,1% SEK - 4,2% CHF - 3,6%
Composition baskets since 1973 has changed only once - in 1999, when the euro was introduced.
At the time the index had a value of 100 points. Historic lows it reached in March 2008 - 70.7 points, while the maximum was recorded in February 1985 - 148.1 points. The index traded during the global currency markets - 24 hours a day, 5 days a week. Auction held at the Exchange ICE (Intercontinental Exchange) - Former New York Mercantile Exchange (NYBOT - New York Board of Trade). But the index is presented in the form of various traded instruments: a futures contract, stock mutual funds (exchange traded funds, or ETF), mutual funds (mutual funds), stock options.
Index is calculated as a weighted geometric mean of the above currencies as follows:
USDX t = 50,14348112 x (EUR t ) -0,576 x (JPY t ) 0,136 x (GBP t ) -0,119 x (CAD t ) 0,091 x (SEK t ) 0,042 x (CHF t ) 0,036
The formula for the degree coefficients corresponding to the weights of currencies in the basket. The calculation of the index coincides with the data that are used in calculating the Fed trade-weighted dollar index of currencies of countries which form the main foreign trade turnover of U.S.. Most of the international trade in the U.S. accounted for the Eurozone (57,6%), followed by Japan - 13.6% United Kingdom - 11.9% Canada - 9.1%, Sweden - 4,2% Switzerland - 3.6 %.
How to use the U.S. dollar index on forex?
Is important to understand whether you like it or not, the U.S. dollar dictates the trends of major world currencies, so the index is an excellent starting point for determining the strength or weakness of U.S. dollar currency pairs.
As a rule, the change trend of the index leads to changes in the trends of the currency pairs, in which he is present and the USD. For example, during an uptrend USDX pairs with direct quote will also increase (eg, USDCHF, USDCAD), and a pair of back - to fall (it EURUSD, GBPUSD).
Using a set of technical analysis tools, such as Japanese candlesticks, support / resistance levels, moving averages, you can get an idea of the strength of U.S. dollar in terms of long-term trends, possible long-and short-term reversals, as well as changes in the attitudes of participants market.