Unveiling the Turbulence: Analyzing DXY
Updated
After a prolonged uptrend in the DXY price, characterized by a series of strong bullish market structures and robust momentum, the market encountered significant turbulence as price approached a unique and critical supply zone. Let me explain the reasons behind this phenomenon.
Around March 17, when the DXY was at the 104.1 level, a small yet impactful supply zone emerged on the lower timeframes (below 1D). This supply imbalance persisted for 80 days, indicating the presence of institutional liquidity and unfinished orders. The price was compelled to mitigate this small order block in adherence to the fundamental principles of price action, market structure, and the interplay between supply and demand.
Upon revisiting this zone, irregular price behavior and unfamiliar patterns surfaced, leading to three consecutive changes in character, ultimately favoring a dominant bearish market structure. The stabilization of price after complete exposure to the supply zone triggered a sharp decline, resulting in a substantial fair value gap (FVG) formation. Subsequently, price rallied once again, only to encounter another supply zone, setting the stage for further downside continuation.
On the higher timeframes, a pullback signal is currently underway, indicating the potential for an extended bearish market structure throughout the current month.
From a macroeconomic perspective, the market awaits the release of the ISM Services PMI results, which will align price trajectory with prevailing economic conditions for the upcoming week. Additionally, a decline in the DXY becomes increasingly likely as the Consumer Price Index (CPI) data approaches in one week. To avoid any adverse impact on CPI results, the Federal Reserve aims to moderate the DXY's bullish momentum following three consecutive heavily bullish candles in the past month.
It is worth noting that several currencies and commodities, including the Euro, Gold, and Bitcoin, exhibit an inverse correlation with the DXY, further reinforcing the aforementioned analysis.
In summary, the market's encounter with a significant supply zone has disrupted the prior bullish trajectory of the DXY, leading to changes in character and the emergence of a bearish market structure. Macroeconomic factors, such as the upcoming ISM Services PMI and CPI data, along with intermarket correlations, lend additional support to this analysis.
Around March 17, when the DXY was at the 104.1 level, a small yet impactful supply zone emerged on the lower timeframes (below 1D). This supply imbalance persisted for 80 days, indicating the presence of institutional liquidity and unfinished orders. The price was compelled to mitigate this small order block in adherence to the fundamental principles of price action, market structure, and the interplay between supply and demand.
Upon revisiting this zone, irregular price behavior and unfamiliar patterns surfaced, leading to three consecutive changes in character, ultimately favoring a dominant bearish market structure. The stabilization of price after complete exposure to the supply zone triggered a sharp decline, resulting in a substantial fair value gap (FVG) formation. Subsequently, price rallied once again, only to encounter another supply zone, setting the stage for further downside continuation.
On the higher timeframes, a pullback signal is currently underway, indicating the potential for an extended bearish market structure throughout the current month.
From a macroeconomic perspective, the market awaits the release of the ISM Services PMI results, which will align price trajectory with prevailing economic conditions for the upcoming week. Additionally, a decline in the DXY becomes increasingly likely as the Consumer Price Index (CPI) data approaches in one week. To avoid any adverse impact on CPI results, the Federal Reserve aims to moderate the DXY's bullish momentum following three consecutive heavily bullish candles in the past month.
It is worth noting that several currencies and commodities, including the Euro, Gold, and Bitcoin, exhibit an inverse correlation with the DXY, further reinforcing the aforementioned analysis.
In summary, the market's encounter with a significant supply zone has disrupted the prior bullish trajectory of the DXY, leading to changes in character and the emergence of a bearish market structure. Macroeconomic factors, such as the upcoming ISM Services PMI and CPI data, along with intermarket correlations, lend additional support to this analysis.
Trade active
However, it is important to note the presence of a fair value gap (FVG) within the ongoing bullish leg, which acts as a potent force weakening the bullish momentum under the influence of the supply.Trade active
The trade is currently progressing towards my target with remarkable momentum and a strong presence of institutional order flow. Cheers to all those who joined me in this trade!Trade closed: target reached
We have achieved our desired outcome as the DXY has successfully reached our projected target, displaying strong momentum and adhering to our planned timeline. Our case study on this chart was built upon a macroeconomic view, which served as a powerful catalyst for this position. Furthermore, we incorporated mathematical theories, such as market structure analysis and a deep understanding of the fundamental forces of supply and demand, to guide our decision-making process. This comprehensive approach has contributed to our success in navigating the market.
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