After all this information you are probably wondering – why do we need to learn about USDX in the first place? Where can it possibly be of use to us? Well, I can tell you that as forex traders you are going to find USDX a very important and a very popular tool.
Forex traders are pretty used to using USDX as the main index in dollar performance. But what is even more interesting is the relations of this index and this chart with all of the other trading charts in the forex market.
Here is the perfect example that I found online.
Do you notice anything common between these two charts?
Well, common. Maybe no. but it seems that these two charts are perfectly mirroring themselves, right? Right! That is because the movement of USDX and EUR/USD chart are almost always the mirror opposites. It even came to trades looking at USDX as a way to determine what movement EUR/USD is going to make or even making.
So, by looking at USDX chart you can easily determine what the behavior of couple with USD as a base currency and as a secondary currency will be.
It is only important to remember that:
- If USD is the base currency in the couple, USDX and the pair chart are going to move the same direction.
- If USD is the secondary currency, USDX and the pair are going to move in opposite directions.
And that is all – easy, right?