As long as we talk about our overall market environment, most people need to pay attention to an important index, which is the U.S. dollar index. Because the fluctuation of the U.S. dollar index will affect the entire market, most investors in the market will pay close attention to the data behind it, and hope that the data behind it can give themselves a better support. Then let yourself better embrace a bright future, because as long as you can understand this data more thoroughly, you can better understand what the big environment is like, and you can’t make effective decisions from a higher structure. investment. Since this index is so important, is it necessary for us to understand this index?
1. What is the US dollar index?
The U.S. dollar index (often written as DXY, DX, and USDX in English) measures the value of the U.S. dollar relative to a basket of other currencies, including those of some of the U.S.’s major trading partners. We must know that the US dollar index is an important indicator that can comprehensively reflect the US dollar in the international exchange rate. Through this indicator, we can better reflect the current market conditions. We must know that the U.S. dollar is the most important currency in a piece of paper currency, so understanding the U.S. dollar index will allow us to better understand the relationship between strength and weakness in the market. In order to better reflect the export competitiveness of the United States and their import costs, in 1985, the financial department established by the New York Cotton Exchange, which can make them the top financial market in the world, so they launched the US dollar Index futures.
Second, what is the composition of the US dollar index?
The U.S. dollar index is mainly weighted by several important currencies such as the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. The proportion of each currency in the US dollar index is different. The proportion of the euro can reach 57.6%, the proportion of the British pound can reach 11.9%, the proportion of the Japanese yen can reach 13.6%, and the proportion of the Canadian dollar can reach 9.1%. , the Swedish krona reached 4.2%, and the Swiss franc reached 3.6%.
In fact, at the very beginning, the currencies of 10 countries were weighted and integrated, but later since the European Union joined the team. They reduced the number of countries from 10 to 6, and the euro became the currency with the most weight. Therefore, many people believe that the fluctuation of the euro has a considerable impact on our US dollar index.
3. What is the role of the US dollar index?
We must know that the U.S. dollar index is a result of the weighting of multiple currencies, so under such a situation, the U.S. dollar index can better reflect the fluctuations in our foreign exchange market. Moreover, many people regard the U.S. dollar index as their benchmark for judging changes in the foreign exchange market. After the U.S. dollar index becomes more stable, they also believe that the foreign exchange market will become more stable.
When the fluctuation price of the US dollar index is huge, the fluctuation of the foreign exchange market will also be very violent. Because the U.S. dollar index can better reflect changes in our entire market, and the U.S. dollar and gold are linked. Therefore, when the U.S. dollar index fluctuates violently, the volatility of gold will also be particularly violent. The volatility of gold is negatively correlated with the volatility of the U.S. dollar index. When the U.S. dollar index starts to rise sharply, the volatility of gold will fall sharply. When the volatility of gold rises sharply, under normal circumstances, the U.S. dollar index will fall sharply.
On the other hand, because the euro is the currency with the largest weight in the US dollar index. Therefore, the U.S. dollar index can also well reflect the status of the euro zone. If the upside of the U.S. dollar index is ideal, the future upside of the euro can also be confirmed by everyone. It can judge its long-term general trend very well. In the short term, the fluctuation of SMS is more violent, and most people have no way to successfully judge the result behind it.
As long as the U.S. dollar index fluctuates greatly, it will also have a major impact on the entire investment market, especially our financial and currency market, and the fluctuation of the entire market will usher in a huge volatility.
4. What are the factors affecting the US dollar index?
There are many factors that affect the dollar index, such as political factors, such as the GDP income of the United States, such as international expenditures and international capital flows. It also includes international political turmoil. If the international market enters large-scale fluctuations, the fluctuations in the US dollar index will also be particularly large.
Of course, this trend is not an absolute trend. Sometimes the stock market and the US dollar index will rise and fall at the same time. But in most cases. There is an opposite direction between the two. If you master the trend of the US dollar index, you can grasp the trend of the stock market in the general direction.
5. How to trade the US dollar index?
Professional investors can invest through US dollar index futures, and the margin amount for trading one lot of US dollar index futures is relatively large. But for most ordinary people, the high investment threshold is not conducive to entry.
The emergence of CFDs has made it possible for ordinary people to invest in the U.S. dollar index. Through the U.S. dollar index CFD product on the EightCap platform, investors can trade the price changes of the U.S. dollar index without actually holding a U.S. dollar index futures position. The U.S. dollar index CFD on the EightCap Yihui platform provides flexible trading conditions. For example, the minimum trading unit can be as low as 10 contracts, and the minimum trading lot is as low as 0.01 lots. Investors only need to invest 100 U.S. dollars to trade the U.S. dollar index, which is greatly reduced. transaction threshold.
If investors have never been exposed to index products before, they may also encounter problems during real trading. You can use the EightCap Yihui platform simulation account to practice in advance. During the simulation trading process, investors do not need to pay any Real funds can enable investors to better familiarize themselves with the trading system, learn to analyze the index market, and be familiar with the interface and functions of the software. Investors who are interested in the US dollar index should go to the EightCap platform to open an account and trade.