Just a quick update on the dollar index levels on the 8 hour chart for the MT5 USDX indicator. The dollar index is currently trying to break through the S4 I mentioned yesterday at 93.97 having failed to make any progress beyond 94.20. In other words index is trading in less than a 30 pip range. This tight range & these levels will, of necessity, impact what is going on in the faster time frames and determine a) the viability of any trade & b) the risk on that trade.
Range may increase once US opens and we also have end of month flows in and out of USD as fund managers rebalance portfolios, & of course we have the FOMC tomorrow. So all in all not easy, particularly if you are only using time charts. In this type of market condition it’s important to have a non time based chart such as a renko as it will make finding entries and exits that much easier.
Levels help to frame the price action & is something we are going to be covering in more detail in this week’s webinar. Hope you can come along. You can sign up at my site at https://www.annacoulling.com
US Dollar Index on MT5 Ahead of FOMC: What It Is and the Relationship
The US Dollar Index (DXY) is a key benchmark for forex traders. It measures USD strength against a basket of major currencies. On MT5, DXY charts are available via symbols like USDX or through brokers. Traders watch it closely ahead of FOMC meetings. Decisions drive USD volatility.
What Is the US Dollar Index (DXY)?
The DXY tracks USD vs six currencies:
- Euro (EUR): 57.6% weight.
- Japanese Yen (JPY): 13.6%.
- British Pound (GBP): 11.9%.
- Canadian Dollar (CAD): 9.1%.
- Swedish Krona (SEK): 4.2%.
- Swiss Franc (CHF): 3.6%.
Above 100 = USD stronger than 1973 base. Below = weaker. Heavy euro weighting makes DXY sensitive to EUR/USD moves.
Volume price analysis (VPA) on DXY charts reveals conviction—high volume rallies show USD buying pressure.
What Is the FOMC and What Do They Do?
The Federal Open Market Committee (FOMC) sets US monetary policy. It meets 8 times a year. Members include Fed governors and regional bank presidents.
Key actions:
- Set federal funds rate (influences borrowing costs).
- Forward guidance on future policy.
- Balance sheet adjustments (QE or QT).
FOMC aims for maximum employment and 2% inflation. Hawkish (hikes) strengthens USD. Dovish (cuts) weakens it.
The Relationship Between DXY and FOMC
FOMC decisions directly impact DXY. Hawkish tone (higher rates) attracts capital—USD strengthens, DXY rises. Dovish signals weaken it—DXY falls.
Pre-FOMC, markets position. Post-announcement volatility spikes. VPA confirms—high volume on USD moves validates direction.
Quantum currency strength indicator on MT5 ranks USD live during FOMC weeks. This shows relational shifts fast.
The DXY reflects USD global strength. FOMC drives it through policy. Quantum tools with VPA deliver the edge ahead of meetings.
The Federal Open Market Committee (FOMC): Role, Responsibilities, and Importance
The Federal Open Market Committee (FOMC) is the monetary policy-making body of the US Federal Reserve. It plays a central role in global markets. Forex traders watch FOMC decisions closely. They drive USD strength, volatility, and sentiment. Volume price analysis (VPA) helps confirm reactions—high volume on moves shows conviction.
Role and What the FOMC Does
The FOMC sets US interest rates and guides policy. Its dual mandate:
- Maximum employment.
- Price stability (2% inflation target).
Key actions:
- Interest Rate Decisions: Raise, lower, or hold federal funds rate.
- Forward Guidance: Hints at future moves.
- Balance Sheet Policy: QE (buy assets) or QT (sell/reduce).
The committee includes 12 members: 7 Fed governors + 5 regional bank presidents (rotating).
When the FOMC Reports
The FOMC meets 8 times a year (roughly every 6 weeks). Schedule on federalreserve.gov.
- Announcement: 2:00 PM ET (19:00 GMT).
- Statement: Explains decision and outlook.
- Economic Projections (“dot plot”): 4 meetings/year—rate, GDP, inflation forecasts.
- Press Conference: Chair speaks 30 minutes after (4 times/year). Questions add volatility.
No surprises—markets price expectations. Beats/misses drive spikes.
Importance for Markets and Forex
FOMC is a top-tier event:
- USD Impact: Hawkish (hikes) strengthens USD. Dovish weakens it.
- Global Ripple: Influences risk sentiment—equities, commodities.
- Volatility: Spikes post-release. VPA essential—high volume validates direction.
Quantum currency strength indicator ranks USD live during FOMC. Trend Monitor aligns momentum.
Trading FOMC with VPA
Prepare with calendar. Wait for volume confirmation. High volume reactions = conviction. Low volume = traps. Quantum tools spot USD extremes fast.
The FOMC shapes US and global policy. Its decisions move markets profoundly. VPA with Quantum indicators turns events into disciplined trades.
Is the FOMC a Political Body?
The Federal Open Market Committee (FOMC) is often misunderstood. Traders ask if it’s political. The short answer: No, it’s not a political body in the traditional sense. But politics influences it indirectly. This independence is deliberate—for economic stability.
The FOMC’s Structure and Independence
The FOMC sets US monetary policy (rates, QE). It’s part of the Federal Reserve System—created by Congress in 1913. The Fed is independent within government. This insulates decisions from short-term politics.
- Members: 12 total—7 Board of Governors (appointed by President, Senate-confirmed, 14-year terms) + 5 regional Fed bank presidents (selected professionally).
- Goal: Dual mandate—maximum employment, 2% inflation. Not partisan agendas.
The Chair (Jerome Powell as of 2026) is appointed but serves fixed terms. This reduces election pressure.
Political Influence – But Limited
Appointments are political (President chooses). Confirmation hearings can be partisan. But once in role, members focus on data/economics. History shows Fed acts against political pressure (e.g., Volcker hikes 1980s despite election).
Markets react to perceived independence. “Political” Fed fears weaken USD long-term.
Trading Implications
FOMC independence supports USD credibility. Dovish/hawkish shifts drive volatility regardless of politics. VPA confirms reactions—high volume post-meeting validates direction.
Quantum currency strength indicator ranks USD live during FOMC weeks.
The FOMC is not a political body. It’s designed for independence. Politics touches appointments—but economics rules decisions. Quantum tools with VPA navigate impacts reliably.
By Anna Coulling