how does dxy affect the prices of currency pairs
The DXY (also known as US Dollar Index) is a measure of how strong the US DOllar is when compared to major world currencies such as GBP, EUR, CAD, JPY etc.
How to read DXY is that when the value is above 100 it is good for the dollar and when it is below 100 it is bad for the dollar.
Let me explan: if dxy reading is 110 then the US Dollar is stronger than major world currencies by 10%.
Today the dxy reading is 98.45 (less than 100) so it means the US Dollar is weaker than other major currency pairs by 1.55%.
With a weak dxy reading as we have today at 98.45 take a look at the eurusd chart i attached, the eurusd exchange rate is increasing signifying that it is costing more USD to buy one EUR which is bad for the dollar.
The DXY (also known as US Dollar Index) is a measure of how strong the US DOllar is when compared to major world currencies such as GBP, EUR, CAD, JPY etc.
How to read DXY is that when the value is above 100 it is good for the dollar and when it is below 100 it is bad for the dollar.
Let me explan: if dxy reading is 110 then the US Dollar is stronger than major world currencies by 10%.
Today the dxy reading is 98.45 (less than 100) so it means the US Dollar is weaker than other major currency pairs by 1.55%.
With a weak dxy reading as we have today at 98.45 take a look at the eurusd chart i attached, the eurusd exchange rate is increasing signifying that it is costing more USD to buy one EUR which is bad for the dollar.
When DXY is going up, prices of currency pairs like EUR/USD seem to fall. Let us take a look at the EUR/USD chart for the last 5 days and the DXY chart for the last 5 days, you will see what i am talking about.
If you were a swing trader, shorting the market would have paid off this past 5 days.
I don't think watching dxy gives any special advantage and edge.
But historically rising dollar means flight to safe haven and bad time for the rest of the world.
Recently the tariff debacle has caused the entire world to get spooked and foreigners are pulling out of US capital markets. So dollar is falling which is opposite to what it used to be since dollar is a safe haven.
There is a lot happening causing markets to act crazy. So best be cautious with using leverage.
The image source is wikipedia:
