Key takeaways
- The US Dollar Index (DXY) is dominated by the euro, so it usually moves opposite to EUR/USD and, to a lesser degree, GBP/USD.
- ICT traders use DXY and other related markets to confirm a bias, not to generate trades on their own.
- Bond yields, gold and stock indices each have a typical relationship with the dollar, but those relationships change over time.
- Comparing DXY with EUR/USD at the same swing point is a common way to look for SMT divergence.
- Correlated trades stack risk: two positions that both depend on the dollar can lose together.
Contents
Currency pairs do not move in isolation. When the US dollar strengthens broadly, EUR/USD, GBP/USD and gold often fall together, and US yields may be rising at the same time. Intermarket analysis means looking at these related markets alongside the one you trade. In ICT practice, the most watched of them is the US Dollar Index (DXY), used both to confirm a bias and to spot SMT divergence.
What it is
The US Dollar Index
DXY measures the dollar against a basket of six currencies. The weights, set by ICE, are approximately:
| Currency | Weight |
|---|---|
| Euro | 57.6% |
| Japanese yen | 13.6% |
| British pound | 11.9% |
| Canadian dollar | 9.1% |
| Swedish krona | 4.2% |
| Swiss franc | 3.6% |
Because the euro makes up more than half of the index, DXY often looks like an upside-down EUR/USD chart. GBP/USD has a weaker inverse relationship, and USD/JPY tends to move in the same direction as DXY because the dollar is the base currency there. You can read more on the Dollar Index page and in currency correlation.
Other related markets
- US Treasury yields. Higher US yields often support the dollar, through the interest rate differential with other countries. See interest rates and currencies.
- Gold (XAU/USD). Gold is priced in dollars and often moves opposite to the dollar and to real yields, although safe-haven demand can push both higher at once.
- Stock indices. In risk-off periods, the dollar often rises while indices such as the S&P 500 fall. In other periods the link weakens or flips.
All of these relationships are tendencies that change over months and years. A correlation that held last quarter may fail this quarter, especially around major central bank decisions.
How to identify it
- Choose your pair and its partner. For EUR/USD or GBP/USD, use DXY. For gold, watch DXY and the US 10-year yield.
- Align the charts. Use the same timeframe and New York time (ET) on both, so swing points line up.
- Check the higher-timeframe agreement. If your daily bias is bullish EUR/USD, is DXY in premium and rejecting a bearish array on its own chart?
- Mark the same reference swings. Asian high and low, previous day high and low, or obvious equal highs and lows on both charts.
- Watch for disagreement at those swings. If DXY takes a high but EUR/USD fails to take the matching low, that is an SMT clue.
- Confirm on the chart you trade. Wait for a market structure shift on the pair itself before entering.
- Check exposure. Count how many of your open trades depend on the same dollar move.
Worked example: DXY and EUR/USD in the London session
All prices are illustrative. The daily bias is bullish EUR/USD, with the previous day high at 1.0884 as the draw. On the daily chart, DXY is in premium and has just rejected a bearish fair value gap, which agrees with that bias.
| Market | Asian level | Price at 03:10 ET | Result |
|---|---|---|---|
| DXY | Asian high 104.40 | 104.48 | Higher high, buy-side taken |
| EUR/USD | Asian low 1.0820 | 1.0826 low | Holds above its low |
At 03:10 ET, inside the London kill zone (02:00–05:00 ET), DXY trades 0.08 above its Asian high. If the two markets were in step, EUR/USD would have broken its Asian low. Instead it holds 6 pips above it. That disagreement is bullish SMT for EUR/USD.
By 03:45 ET, EUR/USD displaces higher and breaks a short-term high, leaving a 5-minute fair value gap. A trader buys on the retrace at 1.0840, with a stop-loss at 1.0818, below the Asian low, for 22 pips of risk. The target is the previous day high at 1.0884, 44 pips away, twice the risk.
On a $10,000 account risking 1% ($100), with a pip worth about $10 per standard lot, size = $100 ÷ (22 × $10) ≈ 0.45 lots.
Later in the morning, DXY falls to 104.10, a drop of 0.38 points, or about 0.36%. Over the same period EUR/USD rises from its 1.0826 low to 1.0865, 39 pips, which is also about 0.36%. The two moves are roughly mirror images, as the euro's weight in the index would suggest. Price reaches the 1.0884 target later in the session, but it could just as easily have stalled; the plan has to be acceptable either way.
How traders use it
- As confirmation. A EUR/USD long is better supported when DXY is bearish on its own chart.
- For SMT. The DXY and EUR/USD pairing is one of the most common SMT comparisons.
- For gold. A falling dollar and falling yields together are often read as supportive for gold.
- For risk control. Long EUR/USD and long GBP/USD at the same time is largely one bet against the dollar. See portfolio risk.
Common mistakes
- Trading DXY signals directly. The index is a guide; the entry still needs a setup on your pair.
- Assuming correlations are fixed. Relationships between yields, gold, stocks and the dollar shift with the economic backdrop.
- Comparing different times. A divergence only counts if both markets are tested in the same window.
- Doubling exposure unknowingly. Several dollar trades can turn 1% risk into 3% risk on one news release.
- Ignoring news. US data at 08:30 ET can move DXY and every dollar pair at once. Check the Economic Calendar.
Summary
Intermarket analysis adds context from related markets. DXY, dominated by the euro, usually moves opposite to EUR/USD and is the most common partner for SMT comparisons. Yields, gold and stock indices add further clues, but their links to the dollar change over time. Use these markets to confirm a bias, wait for a setup on the chart you trade, and watch combined dollar exposure so that correlated positions do not multiply your risk.
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Practice worksheet
Practice worksheet
4 exercises to try on paper. Print it, save it as a PDF from the print dialog, or download a plain-text copy.
- Put DXY and EUR/USD side by side on the 15-minute chart for five days. Mark every Asian high and low on both and note when one swept and the other did not.
- Add the US 10-year yield and gold to your watchlist. For one week, write whether each moved with or against the dollar each day.
- Find one day where DXY and EUR/USD moved in the same direction. What was the news or driver?
- List your open or planned trades and mark which ones depend on the US dollar. What is your combined risk if the dollar moves against you?
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