The U.S. dollar index

The U.S. dollar index is a futures contract listed on the Intercontinental Exchange, or ICE, futures
exchange in the United States. The dollar index is an average of the value of the U.S. dollar against
a basket of six other major currencies, but it’s heavily weighted toward European currencies: The
European currency share of the basket — Eurozone, United Kingdom, Sweden, and Switzerland —
totals 77.3 percent.

 The U.S. dollar index is great parallel universe to the spot U.S. dollar currency pairs. As a
currency trader, be sure to follow the U.S. dollar index, especially its technical
developments.

When the market outlook for the U.S. dollar is uncertain or mixed against other major currencies, the U.S. dollar index can
frequently provide a clearer picture. If the U.S. dollar index breaks key technical levels,
many currency traders react in the major spot currency pairs, building on the break of the U.S.
dollar index. The flows can go either way — sharp moves in spot currency pairs may spur
similar moves in the U.S. dollar index, or breakouts in the dollar index may provoke sharp
adjustments in the spot U.S. dollar pairs — so look to the U.S. dollar index as another key
indicator of the overall direction of the U.S. dollar.