DOLLAR INDEX DXY WEEKLY STRUCTURE Dollar IndexTICKMILL:DXYShavyfxhubDXY , U.S. Dollar Index measures the value of the U.S. dollar (USD) against a weighted basket of six major foreign currencies.  Basket Composition (Weights) • Euro (EUR): 57.6% (dominant component) • Japanese Yen (JPY): 13.6% • British Pound (GBP): 11.9% • Canadian Dollar (CAD): 9.1% • Swedish Krona (SEK): 4.2% • Swiss Franc (CHF): 3.6%  Base value: Established at 100 in 1973. • DXY > 100 → USD is stronger than in 1973. • DXY < 100 → USD is weaker.  Current level (as of mid-June 2026): Approximately 99.5–99.6 (near neutral, slightly below the base).  It is calculated as a geometric mean and traded via futures on ICE. How DXY Affects Interest Rates The relationship is bidirectional but primarily driven by interest rates: • Higher U.S. interest rates (e.g., rising Fed Funds Rate or US10Y Treasury yields) → Attract foreign capital seeking better returns → Stronger USD → Higher DXY.  • Lower U.S. interest rates → Reduce USD attractiveness → Weaker USD → Lower DXY. US10Y yields and DXY often move together (positive correlation), though it’s not perfect due to other factors like economic data, inflation expectations, or risk sentiment.  Example in context: If the Fed (under Chair Warsh) signals hawkish policy or hot inflation data, US10Y yields can rise → DXY rises. This ties directly into the GBP/USD interest rate and bond yield differentials we discussed earlier. Other influences on DXY include: • U.S. economic data (strong GDP, employment → higher DXY). • Geopolitics and risk sentiment (USD as safe-haven → higher DXY in turmoil). • Relative central bank policies. How DXY Affects Other Currency Pairs DXY has a strong inverse relationship with most major USD pairs because a stronger dollar makes other currencies relatively weaker (and vice versa).  • Inverse correlation (DXY ↑ → pair ↓): • EUR/USD (heavily influenced, due to EUR’s large weight). • GBP/USD — rising DXY pressures GBP/USD lower). • AUD/USD, NZD/USD, etc. • Positive correlation (DXY ↑ → pair ↑): • USD/JPY, USD/CAD, USD/CHF (these move with the dollar).  In GBP/USD terms: • Strong DXY (strong USD) → Downward pressure on GBP/USD (harder for GBP to rise). • Weak DXY (weak USD) → Supports higher GBP/USD, amplifying any positive rate/yield differentials for the UK. Practically as a forex trader you have to watch DXY charts alongside pairs for confirmation. A breakout in DXY can signal broader moves across majors. However, it’s not the only driver — local factors (BoE decisions, UK data) still matter a lot for GBP/USD in context. DXY is a sentiment and relative strength tool rather than a direct cause, but it’s highly interconnected with rates and yields. #DXY #dollar