DXY (Dollar Index)

### What is actually inside the basket DXY is a geometrically weighted average of the dollar against exactly six currencies, maintained by ICE Futures U.S. The published weights are: euro 57.6%, Japanese yen 13.6%, British pound 11.9%, Canadian dollar 9.1%, Swedish krona 4.2%, Swiss franc 3.6%. It was set to 100.00 in March 1973, just after the major currencies were allowed to float, and it carries a constant of 50.14348112 to hold that base. The basket has been changed exactly once, in 1999, when the euro replaced the legacy European currencies. Read those weights again, slowly. - The euro alone is more than half the index. - Sweden's krona carries more weight than the Swiss franc. - The Australian dollar is not in it. Neither is the yuan, the peso, or anything from Asia except the yen. So DXY is not "the dollar against the world." It is the dollar against a frozen 1973 trading snapshot, and in practice it is dominated by EURUSD. ### Why that lopsided basket is the point The weighting is not a flaw here, it is the reason the check works. Because the euro is by far the heaviest weight in the basket, EURUSD and DXY trade as near mirror images. DXY up means a stronger dollar, and dollar-quoted pairs come under pressure. DXY down and they get bid. Read the two together and you are reading the dollar leg of your chart directly, which is why DXY is the system's external reference. The gate works like this. You read the pair and DXY together on the 4H, Daily, 15M and 30M, and at the start of each week you view the Weekly and Monthly as pre-market analysis to see where price sits in the larger leg. If DXY does not align with your bias, you fall back to the other leg's fundamentals to break the tie: on EURUSD, that means the ECB and eurozone data. If the picture stays mixed, there is no trade. A setup can look flawless on your entry timeframe and still be a no-trade, because the entry timeframe never overrules the externals. A closed gate means you wait. Note what DXY is *not* used for. Divergence is never applied to it. Divergence lives on the execution timeframe only, never on externals and never on the higher timeframe of the pair. DXY is a bias input, not a signal generator. ### It only measures one side Here is the limit worth holding on to. DXY tells you about the dollar and nothing else. Trade a pair whose other leg is not in the basket, the Aussie for instance, and DXY is blind to half your chart. When that currency has its own story running, its own central bank, commodity flows, regional risk, DXY and your pair can disagree while both are telling the truth about the leg they can see. That is exactly the situation the fallback rule was written for. It is not a fudge, it is the correct response to an instrument that only measures one side. ### It is not the only dollar index The Federal Reserve publishes its own [Broad dollar index](https://www.federalreserve.gov/releases/h10/weights/default.htm), weighted by actual bilateral trade and revised annually. On the weights that took effect 2 February 2026 it carries the euro area at about 21%, Mexico at about 14.8%, Canada at about 12.8%, China at about 10.9% and Japan at about 5.2%. Same dollar, wildly different basket, and it can tell a different story from DXY on the same day. That is not a reason to distrust DXY. It is a reason to know what you are looking at. DXY is a liquid, widely watched proxy for dollar direction. It is not a measure of American trade. ### There is a real contract underneath it DXY is not just a chart. ICE lists futures on it, symbol DX, one contract worth $1,000 times the index value, with a minimum tick of 0.005, which is $5 a contract, on a March, June, September, December quarterly cycle, physically settled against the six component currencies in their weights. Real money hedges dollar exposure through it. This is a traded instrument, not a synthetic number on a website. And the reason it earns its screen space: the [BIS Triennial Survey](https://www.bis.org/statistics/rpfx25_fx.htm) found the dollar on one side of 89.2% of all FX trades in April 2025, and the ten most traded pairs all involve it. Most charts you look at have a dollar leg. The only question is whether you checked it. The alignment check itself is Module 9, Lesson 3: Determining External Factors.