US Dollar is right now one of the most important currencies in the world. USD is right now the international reserve currency. USD is being hoarded by foreign investors as a hedge. There are trillions of US Dollars that under circulation in the foreign countries as compared to US economy. When US Dollar gets strong it hurts the domestic economy but helps the foreign investors who have hoarded it as their dollars bring them more domestic currency. In this article you can read an excellent analysis: Ever since the American dollar began to surge against foreign currencies late last year, economists have warned that the repercussions would eventually be felt on the home front.
As a currency trader who loves to trade EURUSD, GBPUSD, NZDUSD, AUDUSD, USDCAD, USDJPY and USDCHF, you should keep an eye on USD. USD going strong means EURUSD, GBPUSD, NZDUSD and AUDUSD will go down while USDJPY, USDCHF and USDCAD is go up. One way to measure US Dollar strength is to take a look at the US Dollar Index.
The U.S. dollar rose against a basket of major currencies on Monday on renewed risk appetite in the wake of a disappointing U.S. jobs report that suggested the Federal Reserve would hold off on raising interest rates for longer….The U.S. dollar index, which measures the greenback against a basket of six major currencies, was last up 0.26 percent at 96.081, marking a recovery from a nearly two-week low of 95.218 hit Friday. The dollar also hit a one-week high against the yen of 120.550 yen.
So when we talk about USD, we are infact talking about US Dollar Index (USDX). Taking a look at the US Dollar Index can give you a fair idea of where the USD is going against the basket of six major currencies.This video explains the composition of USDX!
This is another good video!
This video explains how the USDX effects the major currency pairs!