How to Read the Dollar Index

Best Cash Back Forex Rebates : Learn How to Trade Forex: Foreign Exchange (FX) Currency Trading – How to Read the Dollar Index

Just like any currency pair, the USDX even has its own chart. Holler at the U.S. Dollar Index:

usdxchart

First, notice that the index is calculated 24 hours a day, five days a week. Also, the USDX measures the dollar’s general value relative to a base of 100.000. Huh?!?

Okay. For example, the current reading says 86.212. This means that the dollar has fallen 13.79% since the start of the index. (86.212 – 100.000).

If the reading was 120.650, it means the dollar’s value has risen 20.65% since the start of the index. (120.650 – 100.00)

The start of the index is March 1973. This is when the world’s biggest nations met in Washington D.C. and all agreed to allow their currencies to float freely against each. The start of the index is also known as the “base period”.

The U.S. Dollar Index Formula

This is strictly for the grown and geeky. Here is the formula to calculating USDX:

USDX = 50.14348112 × EUR/USD^(-0.576) × USD/JPY^(0.136) × GBP/USD^(-0.119) × USD/CAD^(0.091) × USD/SEK^(0.042) × USD/CHF^(0.036)

Got that? Good! Now you can get a wedgie from the school bully.

We’re kidding!

Queen Cleopiptra usually includes the U.S. dollar index in her Chartology articles so if you’re planning to watch USDX, you should also find out what our resident chartologist has to say.

source: www.babypips.com
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