So, the market run up yesterday is followed by a market run down today. What else is new?
My guess is that more than few of you are forex and futures traders. Given this, I thought I would write about something that is relative to both – the U.S Dollar Index. My thought is that discussing the U.S. Dollar Index might be helpful for some of you starting out, struggling to find a trading path and, it is an interesting topic given the currency battles going on in these volatile days..
First things first … The U.S. Dollar Index is a measure of the performance of the U.S. dollar relative to a basket of foreign currencies, which includes the EUR, JPY, GBP, CAD, CHF and SEK. This basket of currencies trades as a futures contract. The current issue of Stocks and Commodities discusses this topic in depth in an article titled, “The US Dollar Index For Spot Forex.”
What interested me in the article is the tie-in the author (James Gelet) makes between this futures contract and trading the forex market. He says, “The U.S. Dollar Index is a tool that forex traders can use, but do you know its value?”
I have to admit the opening line is provocative, provocative enough that it led me into the article, although the subject is not my forte. Anyway, I read the article, learned some interesting things about the index, as well as how traders view it from different perspectives as a measure of the U.S. economy. Currently, as we all know, the index is approaching levels not seen since March of 2008 when it hit a record low of 70.698. Thus, learning about it seems timely.
I suggest those who have an interest in this topic read the article mentioned, as Gelet discusses the index relative to what I wrote earlier in much depth, and, perhaps more importantly for you who are active forex traders, it defines various sample strategies for using the index as a trading signal.
Gelet makes the case for the index as a tool for trading forex, as well as understanding it as a tool for measuring the U.S. economy. Along the way, he delivers some very specific and technical information, including resources for further developing one’s abilities in trading the forex market. So, if you are into learning, as I am, then check it out.
Trade in the day; invest in your life …
