The Dollar Index(USDX) is an index which compares the USD to various other currencies. The currencies include, Euro (EUR), 57.6% weight, Japanese yen (JPY), 13.6% weight, Pound sterling (GBP), 11.9% weight, Canadian dollar (CAD), 9.1% weight, Swedish krona (SEK), 4.2% weight and Swiss franc (CHF) 3.6% weight.

The USD index quotes during US dollar trading hours and is often used as bell weather for future forex moves. It seems to be becoming more popular so I have included the Dollar Index Indicator for MT4 in our collection of indicators.

As you can see below in the GBPUSD chart the USDX is inverse to the dollar index but more importantly it is often a leader of the forex markets from a technical point of view.

I find the best way to view the Dollar Index is to use a moving average. Ideally If you can use one to smooth the price and another to use ad the sgnal line that would be better. This is because the DX can be quite choppy within it’s trend and thus by smoothing it is a lot easier on the trading eye. You will get a few “near” cross overs on the DX but that can not be avoided really.

I can really be helpful when there are strong trend occuring on the EURO or GBP. You will often see that the Doillar Index price is some way above or below the chosen trend moving average. When looking at the forex pairs prices it is often tempting to think about counter trend trading during a strong trend. However, with one look at the Dollar Index and seeing how far it is away from the average you will have no doubt that the trend could continue for a while and you will not want to trade against it. It really can be a life saver in forex trading.

Download:-Dollar Index Indicator