Dollar Index DXY explained
A simple way to tell where the US Dollar is headed is to look at a chart of the Dollar Index (DXY). Money can be made by selling major currencies like EUR when the Dollar Index is rising or buying EUR when Dollar Index is falling. An easy way to access Dollar Index chart is to go to Tradingview.com.
As background reading, the Dollar Index was described here.
It is a weighted geometric mean of the dollar’s value compared only with
- Euro (EUR), 57.6% weight
- Japanese yen (JPY), 13.6% weight
- Pound sterling (GBP), 11.9% weight
- Canadian dollar (CAD), 9.1% weight
- Swedish krona (SEK), 4.2% weight
- Swiss franc (CHF) 3.6% weight.
As can be seen, Euro commands greatest weight of DXY compared to the rest of the currencies so that Dollar’s gain is Euro’s loss. The movement of EURUSD is therefore closely inversely related as explained in this post “Dollar Index vs Euro: charts, figures and story telling”
Viewing DXY in Tradingview
- Open the tradingview website by typing in www.tradingview.com into your web browser.
- On their page, enter INDEX:DXY into the space and click on Launch Chart
A very useful function on Tradingview is ‘Compare’. It is an overlaying function that can place 2 charts in the same space.
To illustrate our point about inverse relationship between EURUSD and DXY, there is an overlay of the two for comparison.
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