DXY filters: do you check the dollar index before trading?
Trading a dollar pair without looking at the dollar's overall direction is like driving one road while ignoring the traffic report. The DXY gives the macro context, and several strategies refuse entries against it.
How do you use the DXY?
- as a filter, a trigger or just context
- how you handle DXY signals that conflict with the pair chart
- the false signals the basket can produce
The DXY guide explains the basket and its limits.
Background: The US Dollar Index (DXY) explained: its six currencies and their weights
The ICE US Dollar Index measures the dollar against six currencies, with the euro at 57.6%. How it's calculated, why its 1973 base and fixed weights matter, and how traders use it.
What currencies are in the US Dollar Index?
The euro (57.6%), Japanese yen (13.6%), British pound (11.9%), Canadian dollar (9.1%), Swedish krona (4.2%) and Swiss franc (3.6%).
What does a DXY reading of 100 mean?
The index was set at 100 in March 1973. A reading above 100 means the dollar is stronger against the six-currency basket than it was then; below 100 means weaker.
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