How To Use The US Dollar Index In Trading EUR/USD Pair?

You must have heard about the famous DOW Index and the S&P 500 Index. But have you ever heard about the US Dollar Index. Just like these stock market indices, USD Dollar Index is used to measure the strength or weakness of US Dollar (USD) against a basket of currencies.

This index is very helpful in forming USD market bias against a number of highly traded currencies. The basket of currencies involves the EURO, JPY, GBP, CAD, SEK and CHF. SEK is the Swedish Krona.

This basket is heavily tilted towards the EURO which comprises 57.6% of the basket weight. US Dollar Index symbol is $DXY and is popularly known as the Dixie. US Dollar Index Futures contracts get traded on the ICE Futures Exchange formerly the New York Board of Trade (NYBOT).

One thing you must have observed is that this index is heavily weighted against the EURO. This is due to the fact that before the EURO inception, this index contained the French Franc, the German Mark, Italian Lira and other European currencies. But ... more.

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