In free market economies, supply and demand is the primary enabler for price movement. Any outside forces that affect supply and demand eventually affect prices. When you are considering a trade in the dollar index market some of the basic fundamentals that you should consider are:

1. Interest Rates: As the economy improves and inflation concerns increase, the greater the probability of a Federal Reserve (Fed) rate hike. Higher interest rates mean more profit for investors in US Dollars, so a US interest rate hike will generally strengthen the dollar.

2. Economy: A recent string of encouraging economic data suggesting the US economy is on the road to sustainable growth is positive for the US dollar. A strong economy raises confidence in the US dollar by assuring foreign investors that they’ll earn a good profit on a stable investment. 

3. Balance of Trade: The balance of trade is the difference between imports and exports. The U.S. trade balance has been narrowing in recent months. The boosted demand for U.S. goods and services could boost overall economic growth in the fourth quarter and strengthen the US dollar.

4. Budget Deficit and National Debt: The US government’s budget and the US national debt can affect the dollar’s value, too. After the recent $1 trillion budget deficits the US national debt currently stands at $9.3 trillion. If foreign investors become worried about the US ability to pay back the debt, or the need to monetize the debt they may sell US dollars.

5. Geopolitical and/or Economic Turmoil: When other countries are in a state of geopolitical and/or economic turmoil, their respective currencies may be perceived as unstable. For instance, the recent concerns in Europe over sovereign debt issues has strengthen the US dollar as investors flock to the US dollar for its perceived relative safety.