is dxy going up good?

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When we talk about trading currencies, forex usually comes to mind, trading currency pairs, for example usd/jpy, eur/usd, etc. But to operate in currencies we also have futures, specifically to do so in currency indices, a market that moves an average of 100 trillion dollars daily.

Currency futures were first made by CME Group and unlike forex where contracts are traded through currency brokers and banks, currency futures are traded on exchanges, which implies that the price is centralized, this being an important difference with the forex market since the price will be practically the same regardless of the broker used by the trader.

There are many differences between currency and foreign exchange futures.

Let's see some of them.

Currency futures are more liquid than the foreign exchange market. Currency futures are not the same as foreign exchange because of its high liquidity, but this does not mean that you can't or shouldn't use them.

The futures market is more stable.

This doesn't mean that it is a risk to operate in foreign exchange.

Currency futures can be traded with modest leverage, while the possibility of using high leverage leads the trader to be able to obtain high profits and also large losses. The problem with leverage is how we misuse it. To understand each other, leverage allows greater exposure by disbursing a percentage of the total investment.

If the leverage is 100: 1, the investor only needs 1% to open a position, so with only $1,000 he will be able to get an exposure equivalent to $100,000.

Even if there is more or less volatility in the market, the commission will always be the same for the broker, even if it is less. In this sense, it happens the same as with stock index futures, so that if, for example, in a currency index the commission per contract when entering is 2 euros and when leaving 2 euros, we know that whenever we operate that index the expense will be that, any day and at any time.

The commission for stock index futures is the same as for currency futures, but the commission for currency futures is different at each broker.

In forex this is not the case, generally there is no commission as such, but the spread or fork, that is, the difference between the sale price and the purchase price in a market, the difference between the purchase prices (ask ) and the sale prices (bid) of a market will be more open than in futures and it is precisely in the open spread where the broker's commission is. We will have to be very careful with the time slots in which we operate when there is more volatility.

The spread is one of the basic elements that we will have to consider when choosing a broker.

The advantage of currency futures is that we know the real cost of each operation in advance, while in foreign exchange we don't know until we close the operation.

The dollar is the most popular and used currency index, although the future of the euro, the pound, the Swiss franc and the Japanese yen are also used.

The dollar index is a measure of the value of the US dollar relative to a set of currencies belonging to the most significant trading partners of the United States.

It is a weighted geometric mean of the dollar's value relative to a series of currencies.

The dollar index allows investors to see the evolution of the dollar in relation to other currencies.

In 1973, the dollar index was created with a price of 100. The index has risen and fallen in the course of time, reaching its highest point in February 1985 with a value of 164.72 and its lowest point in March of 2,008 with a value of 70,698.

If the dollar index is 130, it means that the US currency has appreciated 30% against the basket of currencies. If the index is 70, it means that the dollar has fallen by 30% against all these currencies.

Currency futures allow us to take advantage of the two trends or directions of the market.

The volume is the number of contracts that we want to buy or sell. We will have to write the number of contracts we want to operate in the box of the broker that puts volume in.

The operation with futures means to have more money than is actually available.

The advantage is that you can operate with more money than you have.

The broker will ask us to have a minimum amount of money in our account as a guarantee. It is important to know what the margin call is.

The spread or fork of the index is different. The most liquid ones have a tighter spread, which is ideal because less money is taken from us when we enter and exit a trade.

This can happen with the dollar index. The spread in futures will be the same as it is in all other brokers.

Each Pip that the market moves in favor or against will earn or lose money depending on the number of contracts entered.

A Pip is the smallest movement that a market can make, for example, imagine that the Euro index is trading at 112.20 and the next movement is 112.21, because that means that it has risen 1 Pip.

We are going to see a simple and complete practical example, step by step, from scratch, so that the mechanics of this type of investment can be understood.

1.

The market is the first thing you have to do. In this example we are going to do it with the dollar index, so that the operation will be with the future of the dollar index and we have to be very clear if we think that it is going to go up or down, since if we estimate that it is going to go up, we will have to get long, on the other hand, if we are going to go down, we will have to get short.

2. Let's imagine that we are going to go up. We have found a strong and interesting support in this example. The dollar index is currently trading at 90.60, and there is a support at 90.50.

3. We go to the broker to pick futures and then Dollar.

There are 4. We have to write the number of contracts we want to buy in order to get the volume we want. Suppose 1 contract. We write 1.

The Consumer Price Index is a key measure of inflation in the US. February's reading is expected to be 7.9%. If this impression is correct, prices are up almost 8% from a year ago. Powell said that the Fed will raise rates in March. The investors expect more to come and that's why the price of DXY is going up.

The US dollar index has been rising since May 2021. The index briefly traded above the upper trend line in late November, only to come back inside the channel. When price doesn't break above one side of the channel, it often moves to the other side. The price moved back inside the channel and tested the lower trend line in January.

The price has continued to go up. On Friday, the DXY closed above the upper trend line of the channel and above horizontal resistance.

It continued higher, breaching additional horizontal resistance and the 161.8% extension from the Jan 28 high to Feb 4 low. The psychological round number resistance level at 100.00, the horizontal resistance at 100.87 and the March 2020 highs should be passed if the price continues higher. The RSI is in oversold territory, which may mean that the DXY is ready for a correction.

StoneX is a source of Trading View.

There are short-term support levels that come into play during a time frame. The upper trend line of the long-term channel and horizontal support are first support.

The horizontal support is near 97.82.