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📖 GLOSSARY · CURRENCIES

Currency Strength

How to tell which currency is actually driving a move — the EUR rallying, or the USD falling?

Any single currency pair only tells you about the relationship between two currencies — EUR/USD rising could mean the euro is strengthening, the dollar is weakening, or some mix of both. Currency strength solves that by measuring each of the 8 major currencies against a basket of the others, isolating which one is actually doing the moving.

This matters most when picking between pairs that look similar on the surface: if you're deciding between two pairs that both involve a currency you think will strengthen, checking which of the two counter-currencies is structurally weaker can be the difference that actually matters for the trade idea.

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Related terms
Carry TradeDXY (US Dollar Index)
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