The US Dollar Index is an index of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners’ currencies. This index is highly correlated with US dollar Forex cross pairs since it’s the reference for the US dollar strength versus strongest world currencies.
When we look at the US Dollar Index DXY weekly timeframe, we can see a very strong weekly demand imbalance created around $97.88. That weekly imbalance at #1 is the strongest impulse for months. See DXY screenshot below.
As supply and demand traders trading a supply and demand trading strategy, we should be looking to trade this kind of imbalances. This is a long term supply and demand trading analysis based on the weekly timeframe, you can use this analysis to trade intraday or even scalp the Dollar Index DXY. I am just pointing out the importance and strength of the weekly demand imbalance around $97 where long term longs will be possible again.
Will price retrace at that weekly demand level? We don’t know, but if it does and the scenario is still valid, we should be looking to go long. Will that imbalance play out nicely? We don’t know, the odds are high but imbalances are also broken. Make sure you know what to do at those imbalances, trade your trading plan and focus on high probability imbalances in a clear trend. If you do that, you will be right more often than not, and that’s what we need. Being right more often than not with a nice return on every winning trade will have you on the right side of the equity curve all the time. Just be patient and focus on the clear setups.
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