Using the USD (USDX) and EUR (EURX) indices to help track the direction of currency pairs

Part of my FX trading regime at the beginning of each week, and of each day, is to assess and monitor the 2 major indices, the USD dollar index (USDX) and the Euro dollar index (EURX).  I find this useful to help with determining the possible trend directions on the major FX pairs.  For example, if the USDX is trading up then I would look towards being ‘Long’ on the USD and short on the currencies that make up this index.  Similarly, if the EURX is trading up then I would look to go long on the Euro against pairs that make up this index.

The USD Dollar Index (USDX) is a measure of the value of the US dollar compared to a basket of foreign currencies.  It is a weighted mean of the USD compared to:

EUR 57.6%,  JPY 13.6%,  GBP 11.9%,  CAD 9.1%,  SEK 4.2% and  CHF 3.6 %

The Euro Dollar Index (EURX) is a measure of the value of the Euro compared to a basket of foreign currencies.  It is a weighted mean of the EUR value compared to:

USD 31.5%,  JPY 18.9%,  GBP 30.5%,  SEK 7.9% and  CHF 11.2%