Trading the US dollar: latest moves and forecasts for Q3 2019,”
As is the case with stocks and equities, the U.S dollar’s effectiveness is tracked by the USDX or DXY catalog. The DXY basket of currencies comprises 6 foreign currencies spanning 24 countries since the EUR – which enjoys biggest weight in the index – is the currency of 19 EU member states.
The DXY index consists of:
- EUR (57% weight)
- JPY (13% weight)
- GBP (11% weight)
- CAD (9% weight)
- SEK (4% weight)
- CHF (3% weight)
When the value of your dollar increases against previously mentioned currencies, the DXY index goes up. On the opposite hand, when the euro to dollar or the pound to dollar rates rise, the DXY climbs up since it means the dollar has depreciated to the other major currencies.
If you are trading the EUR/USD pair, you should note that the index provides an accurate measure of the US dollar vividness. As such the index is inversely proportional to the performance of EUR/USD. When the index is trending upwards, the EUR/USD should be showing losses. On the other hand, if the USD e.g. USD/CHF will be the base currency in the pair, which means you are selling CHF to chose the USD, then the performance of the DXY index will mirror the movements in the pair too.
As you can see, the DXY index is a very important benchmark for the US economy and the US dollar and forex traders that focus on the major and minor currency pairs i.e. the ones that consist of the US currency need to be able to its movements in order to make accurate entryways.
The month of July was not very kind to the pair with EUR/USD dropping from 1.12800 to .11228. These movements were expected after the ECB decided to stay which will help regarding interest rates. Euro to USD exchange rates have deteriorated amid the dollar’s strongest performance yet in almost two years and years. As the Euro continues to struggle, don’t be surprised the USD to further solidify its earnings get noticed and be building an upwards strength.
Pound to dollar trading has been quite volatile lately – to no one’s surprise. The GBP has been tumbling ever being the 2016 Brexit referendum and the newest Prime Minister election isn’t doing the market sentiment any favors either.
The outlook is bleak for the pound as the downwards pressure is mounting, and the dollar is poised for another shift.
Dollar going strong
As the global economy starts faltering, the US dollar will likely continue to outperform other economies by a large margin as investors flock to the safe-haven currency. While the decision of the Federal Reserve is anticipated to adjust interest rates in order to hit inflation targets, the bank doesn’t come off as too eager to go overboard to the dismay of investors hoping for much more economic growth.
President Trump is not too happy with the Fed’s decisions on monetary policy either, as he has been a vocal critic of last year’s rate hike spree and the central bank’s reluctance to lower interest rates.
“,2019,Trading the US dollar: latest moves and forecasts for Q3 2019,”Most commodities including oil and gold are priced in USD to facilitate global trade. As a result, any developments that have an impact on the US dollar will ripple everywhere and affect other economies and their currencies as well. Let’s have a look at what’s next in store for the world’s reserve currency of the global economy.”,http://www.israelseo.co.il/images/city-2278497–340.jpg
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