The US dollar is on one side of about 90% of all forex trades. When the dollar moves, almost every pair moves with it. The US Dollar Index (DXY) tracks the dollar against a basket of six currencies, so you can see the dollar's direction in one chart.
How to read it
- DXY rising means the dollar is strengthening: EUR/USD, GBP/USD and AUD/USD usually fall; USD/JPY and USD/CHF usually rise.
- DXY falling means the dollar is weakening, with the opposite effects.
- Because the euro is over half the basket, DXY is close to an inverted EUR/USD chart.
Using DXY alongside a pair
- Mark DXY's higher-timeframe structure and key levels, just as you would for a pair.
- For a long EUR/USD idea, you want DXY bearish, or at least reaching a premium level.
- Watch for agreement: a sweep of a low on EUR/USD should line up with a sweep of a high on DXY.
- Disagreement between DXY and a pair at a key level is the SMT divergence idea from Module 6.
| If DXY… | EUR/USD, GBP/USD, AUD/USD | USD/JPY, USD/CHF, USD/CAD |
|---|---|---|
| Rises | Usually fall | Usually rise |
| Falls | Usually rise | Usually fall |
| Ranges | Pair-specific drivers dominate | Pair-specific drivers dominate |
Where to find it
DXY is calculated by ICE, with futures on ICE (often shown as DX). Many charting platforms show it as DXY; some brokers offer a CFD version such as USDX. Check that you're looking at the same instrument each time.
Key takeaways
- The US Dollar Index (DXY) tracks the dollar against six currencies, weighted heavily to the euro.
- A rising DXY usually means EUR/USD, GBP/USD and AUD/USD fall, and USD/JPY and USD/CHF rise.
- Read DXY's structure and levels alongside your pair to confirm or question a trade.
- DXY doesn't cover emerging-market currencies.