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This is a brief article on the correlation between the American Dollar index and how it can be used in daily forex scalping systems or strategies.
US Dollar Index Hourly Currency Chart
This is an hourly candlestick forex chart displaying the price of the American Dollar, or the US Dollar Index (USDX). The prices you see on this and other US Dollar Index charts are a representation of the value of the greenback. The Index is calculated against the value of an array of different world currencies.
In your forex trading travels you may encounter many simple technical system trade setups or exit signals on the US Dollar Index that might not seem as profitable or probable on a forex chart; Currency Pairs such as the USD/CAD or USD/CHF are prime examples.
The US Dollar Index is calculated very accurately and should be used as a method of checking the actual trend and for double checking your technical trading systems signals. The volatility in many of the forex trading instruments can make it hard for you to judge the true direction of the US Dollar or get a clear visual of the trends. The USD moves all the related forex pairs for the most part; So you should always have a live US Dollar Index chart open for scalping systems or daily charts for long-term forex trading systems.
I have one suggestion about the setup of your trading forex charts...
Assume you always trade the USD/JPY.
Instead of switching between different currency pair charts trying to separate out the technical signals from the Yen and/or Dollar. Setup one chart of the USDX and beside it setup a USDJPY forex chart. It should look like this:
These are both Current Price Hourly Charts. The chart on the left displays the US dollar index and the chart on the right display the exchange rate price of the USD/JPY forex pair.
The USDX made a clear technical triangle (indication of supply/demand consolidation), broke out of that triangle, came back to the fulcrum or point of the intersecting lines and continued on its new trend identified by the triangles fulcrum point. The USD/JPY pair displayed only an upward price movement and then the following USD selling came through on the pair.
If you were watching these charts and were also educated on technical trading systems you could have entered a safe trade at the top of the USD/JPY swing high and collected the initial breakout profit plus extra on the Dollar technical triangle. Can you spot the Triangle, breakout, pullback to point of the breakout and the continuation of the breakouts trend on the Dollar? Notice the technicals in the Dollar/Yen pair? I don't! Note the difference in clear cut technical trading signals. You have a traders eye if you can spot all the technical elements.
All Charts here are from akmeter.com
