Indicators: iUSDx (USD index) Multicurrency Indicator
newdigital, 2013.11.06 15:02
Dollar Index Futures & Correlations to Crude Oil & Gold Futures TradingLet's first discuss the basic correlation that traders use. There is a negative correlation between the DX and almost every other market that traders watch. The Dollar is negative to other currencies b/c it's the world reserve currency, and it's negative to commodities b/c of the simple laws of supply and demand. Let's focus on the correlation to Gold & Crude Oil Futures.
As traders, there are lots of different times in the day when the dollar begins to move more dramatically, such as the open of the US Markets @ 9:30am EST, before and after major news events such as Jobless Claims Reports or FOMC News. We look for the Dollar to begin its trend, and using the negative correlation between these markets, we look for crude oil & gold opportunities to the opposite of the dollar's trend. When the Dollar is trending, traders use Breakout Patterns to capitalize on this correlation. With the dollar rising, look for high-percentage entries to the short side of Gold or Crude Oil Futures.
Most traders will use the Dollar correlation as a filter because it allows them to avoid high-risk entries on Gold & Crude Oil Futures. Without a trend on Dollar, the Gold & Crude Oil Futures also show flat price action, and tend to reverse their current trends often. The dollar has a tendency to get very choppy during indecisive times in the market, and we tend to stay away from higher-risk trading on Crude Oil & Gold during these times.
Another important thing to watch on the Dollar is key Support & Resistance around simple chart patterns. For example, using a Head & Shoulders pattern on the Dollar, traders will avoid trading Gold & Crude Oil when the Dollar attempts to complete the trend reversal. Smart traders will wait to trade the reaction to the move around these extreme levels, rather than trying to be the first to enter the market when the Dollar here. In closing, the Dollar Index Futures can be used very effectively with a negative correlation with many of the market we love to trade. Of all the uses for this index, the most effective way most traders use the Dollar is as a filter, to avoid taking high-risk trades on other markets such as Crude Oil & Gold.
newdigital, 2013.11.06 15:03
Based on - U.S. Dollar Index - USDX
U.S. Dollar Index (USDX) was introduced in March 1973, when the
Bretton Woods system ceased to exist. The index shows the ratio of U.S.
dollar against a basket of six major world currencies - the euro is
(EUR), Yen (JPY), British Pounds (GBP), Canadian Dollar (CAD), Swedish
krona (SEK) and Swiss Franc (CHF). As part of this basket each currency
has its own weight:
EUR - 57,6%
JPY - 13,6%
GBP - 11,9%
CAD - 9,1%
SEK - 4,2%
CHF - 3,6%
The composition of the basket of 1973 changed only once - in 1999, when the euro was introduced.
At the time of occurrence of the index had a value of 100 points. Historic lows it reached in March 2008 - 70.7 points, while the maximum value was recorded in February 1985 - 148.1 points. The index traded at the time of the global currency markets - 24 hours a day, 5 days a week. Trading on the Stock Exchange are ICE (Intercontinental Exchange) - The former New York Mercantile Exchange (NYBOT - New York Board of Trade). Moreover, the index is presented in the form of various traded instruments: the exchange funds (exchange traded funds, or ETF), mutual funds (mutual funds), stock options.
The index is calculated as a weighted geometric mean of the above
mentioned currencies according to the following formula:
USDXt = 50,14348112 x (EURt) -0,576 x (JPYt) 0,136 x (GBPt) -0,119 x
(CADt) 0,091 x (SEKt) 0,042 x (CHFt) 0,036
In the formula, the power coefficients corresponding to the weights of
currencies in the basket. Calculation of the index coincides with the
data used in calculating the Fed trade-weighted dollar index of
currencies of countries which form the main foreign trade turnover of
U.S..
Most of the international trade in the U.S. accounts for the euro area (57.6%), followed by Japan - 13.6% United Kingdom - 11.9% Canada - 9.1%, Sweden - and Switzerland 4.2% - 3.6 %.
How to use the dollar index on the forex?
It is important to understand whether you like it or not, dictates that the U.S. dollar trends of major world currencies, so the index is an excellent starting point for determining the strength or weakness of U.S. dollar currency pairs.
As a rule, the change trend of the index leads to changes in the trends of the currency pairs in which the USD and he is present. For example, during an uptrend USDX pairs with direct quote will also increase (eg, USDCHF, USDCAD), a couple from the back - slow down (it EURUSD, GBPUSD). Using technical analysis toolkit, such as candlesticks, support / resistance levels, moving averages, you can get an idea about the strength of the U.S. dollar in terms of long-term trends, the possible long-and short-term reversals, as well as changes in the attitudes of market participants.
Wonderful presentation.
I would like to add a free USDX resource. The actual USDX does not trade 24 hours like regular FX. Also, the granularity of the movement of the USDX is not as fine as the correlation chart found here. So here is a great free website to get true 24 hour fine grade movement. And it even lets you put on some indicators.
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
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iUSDx (USD index) Muticurrency Indicator:
The iUSDx indicator uses the "MCM Control Panel" for multicurrency mode. It calculates the USD index.
The USDx Index measures the performance of the US Dollar against a basket of currencies: EUR, JPY, GBP, CAD, CHF and SEK.
USDx started in March 1973, soon after the dismantling of the Bretton Woods system. At its start, the value of the US Dollar Index was 100.000. It has since traded as high as the mid-160s and as low as 70.698 on March 16, 2008, the lowest since its inception in 1973.
The makeup of the "basket" has been altered only once, when several European currencies were subsumed by the Euro at the start of 1999. USDx is updated whenever US Dollar markets are open, which is from Sunday evening New York time (early Monday morning Asia time) for 24 hours a day to late Friday afternoon New York time.
The USD index is calculated as a geometic average of 6 currency pairs:
USDx = 50,14348112 * EURUSD^(-0,576) * USDJPY^0,136 * GBPUSD^(-0,119) * USDCAD^0,091 * USDSEK^0,042 * USDCHF^0,036
Author: Константин