What Is US30 in Forex Trading? An Overview of the Dow Jones Index

In the ever-evolving world of financial markets, you might have heard the question, “What does US30 mean in forex trading?” To answer this question, first you need to learn what the US30 Index is and how it relates to the forex market.

The US30 Index, also known as the Dow 30 or the Dow Jones Industrial Average (DJIA), represents the top 30 companies in the New York Stock Exchange (NYSE) and NASDAQ. With companies in various sectors and industries, the US30 forex represents the US economy very well.

But how does the US30 Index relate to the forex market?

In this blog post from ITBFX, we will review the US30 Index, see what it shows us, and find out how forex traders could benefit from it. If this sounds interesting to you, we suggest you stay tuned!

Understanding the US30 (Dow Jones Industrial Average)

If you have the smallest interest in the US or global economy and financial markets, you’ve probably heard the term “US30.” But what is US30 in forex trading, and what does it mean?

The US30 is a stock market index that represents the top 30 publicly traded companies in the New York Stock Exchange (NYSE) and NASDAQ. Also known as the Dow Jones Industrial Average (DJIA), the US30 Index comprises the shares of large, blue-chip companies that hold a considerable number of jobs and retirement funds.

These companies are considered to be the backbone of the US economy, yet they are extremely dependent on public spending habits.

Because the Dow Jones (DJIA) Index consists of the shares of such large companies, it is considered a barometer of the US economy as a whole.

History and Background

The US30 Index was co-founded by journalist Charles Dow and his business partner Edward Jones in 1896. The Dow Jones Industrial Average is the second oldest stock market index in US history.

Charles Dow was also the founder of Dow Jones and Company Inc., as well as the man behind the Wall Street Journal.

Together, these two men created the US30 Index as a spin-off of the Dow Jones Transportation Average. The US30 forex index initially consisted of 12 companies, which heavily focused on commodities. As the years passed, however, these companies gave their place to more modern businesses such as tech, finance, and retail.

How Is the US30 Index Calculated?

The companies that make it to the US30 Index are hand-picked by a committee of S&P Dow Jones employees and Wall Street professionals. These companies must have a strong investor interest, sustained growth, and excellent reputation.

To calculate the Dow Jones Industrial Average (DJIA), the share prices are added together, and the result is divided by a number called the Dow Divisor‌, which is currently equal to 0.15172752595384.

The amount of this divisor is calculated and published by a team of Wall Street Journal and S&P Dow Jones Indices experts.

In the early days, the index was calculated by dividing the sum of the share prices by the number of companies, giving us an average price.

It is also important to keep in mind that the US30 Index is calculated on a price-weighted basis as opposed to a market-cap-weighted one. This means that the more expensive the price of a company’s stocks is, the more influence it will have on the overall Dow Jones Index.

This calculation method has led to critics against the Dow Jones Index, as many believe that companies with lower share prices and higher market caps could be just as influential in the US economy.

What Does the US30 Forex Index Tell Us?

As mentioned before, the US30 Forex Index comprises a set of extremely large companies that run the US economy. As a result, this index shows how different sectors and industries in the US are performing. In a way, many consider the DJIA (Dow Jones Industrial Average) to be the determinant of the overall health of the US market, as it acts as a barometer of the US economy.

The US30 Index can be extremely beneficial for intermarket analysis and determine the direction in which other markets, such as forex, bonds, and commodities, are moving.

The DJIA Dow Jones Index also demonstrates the public’s risk tolerance. If people are more willing to take risks, the price of the index will increase and vice versa.

How Is the US30 Related to Forex Trading?

Now that we know a little bit more about the Dow Jones Industrial Average (DJIA), it’s time to get back to the main question: “What is US30 in forex trading?”

Although the US30 Index is more directly connected to the stock market, it is still considered a benchmark to measure the performance of the US economy. The US30 forex index plays a major role in determining the value of USD, which is the most liquid and traded currency in the forex market. In fact, the high liquidity and trading volume of the US dollar, in addition to the influence of the US30 Index on it, make the index extremely useful in the forex market.

On another note, the volatility of the US30 Index also impacts fluctuations in the forex market. If the US30 Index is facing a lot of volatility, traders may lose their trust in the US dollar’s stability, leading to fluctuations in the forex market as well. As a result, it could be said that any factor that might have an impact on the Dow Jones Index might also influence the forex market.

Traders can use the US30 Forex Index as an indicator to help them identify trading opportunities and confirm existing trends.

What Is the US30 in Forex Influenced By?

As mentioned before, forex traders should be aware of factors that impact the US30 Index, as they ultimately Impact the foreign exchange market as well. Learning about these factors helps traders make more informed decisions, as the US30 could be used as an indicator in their trading strategy or as a risk management measure. In this section, we will overview the factors that impact the Dow Jones Industrial Average (DJIA).

1- The US Economy

The US economy and the US30 Index have a mutual relationship, where both can be influenced by the other. The performance of the US economy is probably the most important determinant in the Dow Jones Industrial Average. Any changes in the economy will lead to changes in the US30 Index as well. Consequently, changes in economic measurements, such as gross domestic product (GDP), unemployment and inflation rates, and consumer confidence, can all determine the performance of the DJIA Index.

Considering the role of intermarket analysis in the interpretation of the US30, traders are recommended to stay up-to-date with economic news and events to evaluate currency values better. Some of the best sources for this purpose include Forex Factory and other economic calendars, such as the exclusive economic calendar offered on ITB Trader.

2- Geopolitical Relationships

Following the previous point, it’s important to know that global trade policies and geopolitical relationships are another determinant factor in the US30 Forex Index.

These policies, relationships, economic events, and international economic conditions impact the companies in the US30 Index, hence influencing the US economy as a whole. As a result, there might be fluctuations in the USD price and its strength in relation to other currencies, which can impact the forex market.

For these reasons, traders are encouraged to use tools such as economic calendars to better access these events and make their trading decisions based on them.

3- Central Bank Decisions

The monetary policies of different countries, especially the US, can also impact the Dow Jones Industrial Average (DJIA). Central banks such as the Federal Reserve make decisions that affect this index. For instance, their policy announcements, interest rate decisions, and general guidelines may be things that traders would want to follow and incorporate into their market analysis.

Other Events and Unexpected Factors

Other unexpected factors, such as global pandemics and natural disasters, also affect the economy of the United States and, ultimately, the US30. These events can either boost or disrupt the activities of US30 companies, leading to increases or decreases in the USD value.

What Is the US30 in Forex Trading Technical Analysis?

Traders can use technical analysis to interpret the data related to the previous price movements of the US30 Forex Index. By doing so, they can find market entry and exit points, determine support and resistance levels, and identify trends. Analyzing the US30 Index could help traders decide which direction the forex market will move in.

What Is the US30 in Forex Fundamental Analysis?

Using the US30 Index in the forex market goes hand in hand with fundamental analysis almost all the time. Even if you’re using technical analysis to interpret the movements of the Dow Jones Industrial Average, you’re still utilizing fundamental analysis to determine the impact of the price action movements (from your technical analysis) on the forex market.

Additionally, the factors stated before also impact the index on a fundamental basis. So traders need to keep up with them and consider them when making their trading decisions.

Bottom Line

In this article from ITBFX, we answered the question, “What is US30 in forex trading?” The US30 Index, also known as the Dow Jones Industrial Average, is the second oldest stock market index in America and one of the most popular economic indexes in the world, and for good reason.

Encompassing the largest American companies from different sectors, the US30 Index gives us a good feel of how the US economy is performing. This index plays a major role in the value of the US dollar, which is the most traded currency in the forex market. As a result, it could be said that the Dow Jones Index can significantly impact the forex market, which we thoroughly went over. Still, if you’ve got more questions regarding the Dow Jones Industrial Average (DJIA), scroll down to the comment section and let us help you!

What is the Dow Jones Industrial Average (DJIA)?

The Dow Jones Industrial Average, aka the US30, consists of the 30 largest companies in the New York Stock Exchange (NYSE) and NASDAQ that are publicly traded.

What is US30 in forex trading?

The US30 is considered a barometer of the US economy. The index shows us how well the USD is performing, which, considering its trading volume, could give us great insights into the foreign exchange market.

What factors impact the US30?

The US30 forex index is impacted by factors such as the US economy, global trading policies, geopolitical relationships, central banks’ monetary policies, and other unpredictable factors such as pandemics and natural disasters.