The DXY weighs the dollar against six currencies, with the euro alone accounting for well over half the basket. It is therefore closer to a euro-dollar proxy than to a true trade-weighted measure, for which the Fed publishes a broader index.
A rising dollar tightens conditions everywhere. Commodities priced in dollars become more expensive for everyone else, foreign borrowers with dollar debt face a larger bill in their own currency, and US multinationals translate overseas earnings back at a worse rate.
It is one of the cleanest reads on global risk appetite. The dollar strengthens when investors want safety and weakens when they reach for risk, which is why it is worth checking before attributing a move in equities or commodities to anything local.