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Chapter 27, Part I. Let’s Meet with Dollar Index. Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 26, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Commander in Pips: As you understand, the EU includes 16 countries that have adopted the EUR. Since it unites a lot of countries, the EUR has such a significant value in the index. Japan also has one of the largest of the world’s economies – its value in the index is also significant. The second reason, I suppose, is that EUR is considered by some to be the second world reserve currency.

    Pipruit: And where are the others? I mean Australia, New Zealand, other countries…Why just 6 currencies?​

    Commander in Pips: Although you’ve said correctly and even 21 countries are just small part of the world, these countries are among the most powerful and affluent in the Global economy. Just remember the worlds reserved currencies. It means that many other currencies are followed by one of these countries, and adding some other currencies will give a shallow effect on overall picture.

    Pipruit: And what we can do with this index?​

    Commander in Pips: You may trade it - although not on spot forex but on the futures market. Intercontinental exchange (ICE) has a futures contract on dollar index (USDX) - $1000x Index value. In other words, if the index will change with 1 point your assets will change at 1000$. But this change is quite significant. Tick size (minimum fluctuation value) is 0.005 or 5$. Also you may trade options on dollar index – this could give you a lot of additional strategies and flexible opportunities.

    Pipruit: Sir, I dare to suggest, that since USDX has significant correlation with EUR, it probably moves in the same direction as EUR/USD, so why do we need it at all?​
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