Good day traders!

In forex trading, it would be good if you take note of the trends in the US Dollar index Most of the major cuurency pairs are traded against the US dollar. What happens in the US will impact on the US dollar and hence the other major currency pairs. Happenings around the world such as wars and geopolitical events too have an impact on the US dollar.

Forex Trading Tool - Dollar Index Chart

Forex Trading Tool – Dollar Index Chart

The US dollar is seen as a safe haven currency and it usually goes down when stock markets are in an uptrend. When there is an impending danger on the horizon and risk aversion becomes the main overriding sentiment, investors and traders flock to the US dollar which is generally seen as a safe haven for investors.

As such, it would be wise for any forex trader to monitor the US dollar index. Bloomberg offers a free chart for you to track the US dollar index, which measures the US dollar against a basket of foreign currencies. It gives you a measure of how strong or how weak the US dollar is in relation to the other risk currencies such as the euro, pound, aussie, loonie, etc.

The chart provided by Bloomberg allows you to use simple trend following indicators like MACD and other momentum indicators like RSI and Stochastics. It also allows you to map the Bollinger band on the price itself and hence allow you to see whether the Dollar index is about to reach its extremes or it is about to turn to touch the middle band of the bollinger band.

Of course if you are looking for more indicators and signals to help you read the US dollar index, this tool wouldn’t be sufficient. However, if you wanted a quick glance to help you understand the sentiments at the moment you are going to indulge in some forex trading, the chart from Bloomberg will suffice.

To me, there are times when simple tools will help you better than the more complex ones. Simple tools can help you make a better decision when trading forex and also help you unclutter your mind which often occurs when you are looking at too many technical indicators on your forex chart and also looking at multiple timeframes at the same time.

I hope the tool can help you in your forex trading.

To your forex trading success!

~Ardy

Singapore Forex Trading Blog