Dollar Index Indicator (USDX)
Simply an irreplaceable indicator for those who like to establish a connection between the dollar exchange rate and the fundamental factors influencing it.
The indicator is designed to integrate an indicator such as the dollar index (USDX) into the chart of a currency pair; it not only shows the latest value, but also displays the dynamics of change over a certain period of time.
And this makes it possible to track the impact of changes that have occurred on the exchange rate of the US dollar.
The dollar index indicator is practically a ready-made tool for trading with building a relationship (correlation) between the exchange rate of the American currency and the USDX index; it can be used on any of the currency pairs that include the US dollar.
The dollar index displays US trade turnover with a number of leading world powers; it contains the proportion between imports and exports of goods, and also takes into account a lot of other equally important parameters in the calculations.
The dollar index indicator (USDX) is a powerful tool when trading on news, in addition, it can be used to analyze the influence of external factors on the forex market.
After downloading the indicator, add it to your trading terminal. This script has virtually no settings, you can only change the levels yourself and customize the visual display of the lines.
After launch, it appears in a separate window in the form of a red line; if desired, its color can be easily changed in the global settings.
As can be seen from the above example, a direct pattern is observed between the increase in the value of this indicator and the US dollar exchange rate.
If the index increases, then the exchange rate of the American currency grows confidently; in the opposite situation, the opposite happens.
As practice shows, this is one of the most accurate tools that can be used for medium- and short-term Forex trading.
Trading strategy on the dollar index indicator
For trading, you can use almost any currency that has an inverse correlation to the US dollar. That is, in a currency pair, one of the currencies will be the US dollar, and the second is the currency whose rate changes in the opposite direction when the dollar rises or falls.
This approach will strengthen the emerging trend and provide an opportunity to earn much more.
An example of trading is such a popular pair as EUR/USD; the figure clearly shows that it is inversely proportional to the dollar index (USDX); as the index value increases, the price of EUR/USD decreases and vice versa.
In this case, we carry out a purchase if there is a decrease in the index, and we carry out sales transactions when it increases. The greater the change that has occurred, the stronger the trend can be expected in the Forex market.
One should also not exclude the possibility of using it on pairs in which the US dollar itself is the base currency.