The dollar index is usually the best way to see the performance of the dollar. It is usually compares the performance of the dollar with a basket of the major currencies. Each of these currencies is weighted differently based on its volume in the global trade. The current weights for the index are: euro (0.576), Japanese Yen (0.136), British pound (0.119), Canadian dollar (0.091), Swedish Krona (0.042), and Swiss franc (0.036). As seen, the euro forms the largest component of the dollar index because of its value in the global trade.
Year-to-date, the dollar index has risen by almost four percent. This has happened mostly because of the divergence on the central banks. While the Fed has turned out quite hawkish, the other central banks have been a bit hawkish, partly because of their flattening economies. In the European Union, the officials extended their plan for quantitative easing to December while in the UK, the officials turned hawkish a month ago. In Japan, Kuroda and his team believes that tightening right now is not in the best interest of the country.
The dollar index has reached $94.61, which is lower than the YTD high of $95.20. It is higher than the $93.8. The current price (at the time of writing this article) of the index is in line with the middle band of the Bollinger bands indicator. The RSI of the index is currently at 49.5. This means that there is a likelihood that the index could attempt to move higher. If it does, markets will be watching out for the $95.1 level which is the upper side of the Bollinger bands.