Using DXY for Confluence -

September 17 2021
Tags Correlation

What is the DXY? The dxy is the dollar index. The dollar index shows us the strength or
weakness of the US dollar. Since the USD is the worlds reserve currency and most the
world trades dollars, it is crucial to watch the DXY if you are trading any USD pairs.

Here is an example from Sept 17 2021 - of how you can use DXY to add confluence to
a trade idea on EURUSD.

With first glance, we can see that price is bearish. We are creating lower lows and lower
highs. Price is currently in a corrective phase and we should be looking to get into a
trade to ride the next impulsive leg.

We can see that heading into NY open, price has reached a premium level. We would
want to look for sells but on the 1 hour timeframe there is no clear supply zone for us to

Using DXY for Confluence - September 17 2021 1

 start looking for shorts. We don't want to sell based solely on being in a premium, we
want to find areas of supply to increase our probability and increase our RR.

So we want to look for sells but nothing is clear on the 1H. For added confluence, we
look at the DXY to see that if our bias lines up or there is something else it is telling us.
On DXY we can see that price has tapped into a clear 1 hour demand zone. Our setup
is forming and we should be looking for a continuation on the DXY. EURUSD and DXY
are inversely correlated so when one is going up, the other is going down. This gives us
added confluence that we should continue to look for shorts on EURUSD.

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 If we zoon in to the 15 minute on EU, we can see that we are pushing into a nice supply
zone. This matches up with our DXY bias and we can start looking for a shift in market
structure before starting to take any shorts. We want confirmation that this level is going
to hold and we will see it on a LTF.

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 We can even refine our POI to a 5 min supply zone. Now we go down to the 1 minute
and look for a momentum shift.

Price rejects off the 5 min supply zone with aggression and we now want to see price
break the previous low before we can start looking for any shorting opportunities. IF
price breaks the low, then we have confirmation that there is a structural shift on the 1
min which follows HTF intention.

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 Price breaks the low, giving us confirmation that orderflow has shifted and it is time to
start to look for sells. Before breaking, price created a new supply zone. Once again, we
would look for range, initiation, mitigation, and continuation.

Because we have 2 supply zones close to each other, we could be safe and put our
stop loss above the higher zone. This way if price decides it wants to tap into that zone

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 instead, we are safe.

As we are expecting price to create a continuation on the higher timeframe as well (

because the dxy is lining up on 1H), we can set our target to the previous low at
minimum.

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 Trade triggered

From here, price doesn't look back.

1H after, price continues to melt even further for a beautiful 50+ pip move in the span of
a few hours. This is a 1:10 trade without even using a super tight stop loss!

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 Looking at the DXY, we can see it plays out beautifully as well

For pairs that are XXXUSD crosses, sells would have been favorable with this DXY
setup. for USDXXX pairs, buys would have been favorable.

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 https://fearlessfx.com/training-mini-series/

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