USD Value

Beginner Questions
1

The USD is involved in many currency pairs and has an influence on the entire market. I believe USD pairs generally fluctuates in value fairly synchronously. However, they don’t always match up perfectly.

Is there a way of measuring the strength of the dollar overall, independent of particular pairs? This could be compared to a particular pair (USD/XXX) and you could see if it is over- or under-valued. I am thinking this would be as simple as having a weighted mean (average) for all of the pairs. Something tells me there is already something like this…but i don’t know what it is.

2

Just look at the single DXI chart.

Put a momentum, or RSI on it. That’s as good as you’re gonna get.

You can find charts with the solo dollar on DailyFX charts, and a few others.

My broker has the dollar as a single currency, so it may be that yours does as well.

3

USD index.

4

The problem with the USD Index is that it’s very heavily weighted toward the EUR, like 70%, so there’s a very strong inverse correlation between the index and EUR/USD.

5

The current weighting is:

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
Swiss franc (CHF), 3.6% weight

But the Inverse Correlation statement certainly holds. Here is a snap shot of the USDINX (Center Bottom), EURUSD (Center Top), GBPUSD (Right Top), USDJPY (Right Bottom) and un-included currency pairs AUDUSD (Left Top) and NZDUSD (Left Bottom)

While the EURUSD certainly has the strongest Inverse Correlation, during strong market moves like the one seen last year and in 2008, almost any currency with USD as the Counter Currency (second in the pair) will move inversely of the USDINX.