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 the strongest world currencies.
Looking at the US Dollar Index DXY weekly timeframe, we can see a strong weekly demand imbalance created around $97.88. That weekly imbalance at #1 is the strongest impulse for months. See the DXY screenshot below.
As supply and demand traders trading a supply and demand trading strategy, we should be looking to trade this kind of imbalance. This is a long-term supply and demand trading analysis based on the weekly timeframe. You can use this analysis to trade intraday or 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 the 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. You will be right more often than not if you do that, and that’s what we need. Being right more often than not with a nice return on every winning trade will always have you on the right side of the equity curve. Just be patient and focus on the clear setups.
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