DXY analysis - 7/12/2025

Here we present the weekly chart of DXY. We have divided the price action into the different quarters. We can see that the price started to weaken from the 1st quarter and this accelerated in the 2nd quarter. The price has been range bound for the last 2 quarters. If you have been following our analysis, we were looking for a raid of the Q3 high and this has happened. The dollar has weakened since then and price has closed in the weekly support. This is bearish.

Next week we have the FOMC on Wednesday and the NFP on Friday. It looks like we are going to go lower. However we are not totally convinced of the bearish outlook until we have a close below the support. Also if you look at the USDJPY chart, we have noted a clear divergence which makes us believe that we have manipulation. The structure however is bearish and for this reason we wont take any trades on GBPUSD and EURUSD. we will remain on the sidelines here. But USDJPY is another story.

If we see the daily chart of DXY, the price has been contained by the 200 ema, the daily structure is broken. So the chart points to a bearish bias. We have marked the sell side liquidity. As noted earlier, we will remain on sidelines until the support is broken. If price closes below the support, we will look for longs on AUDUSD and EURUSD and target the sellside liquidity. If price is very weak, the price can go and take 3rd quarter low 96.30. This is likely to happen next quarter. If the DXY weakens it will good for our bias on Nasdaq and Gold as a weaker dollar is good for both of them.

One thing that does not align with this analysis is the USDJPY chart. This is why we will remain on sidelines until support is broken.

Based on this divergence, we will look for longs on USDJPY. Please see previous analysis on USDJPY. the price is near a previous high and there is a high chance that the liquidity will be taken. But if the US dollar falls aggressively after FOMC, it is likely the USDJPY will also fall and we probably will take a loss on this trade. Also note GBPJPY which is very near previous high and this will be taken and once that is done we will look for shorts on GBPJPY as a hedge for the portfolio.

Finally a bonus chart. Here we compare the performance of Nasdaq and DXY during Trump’s first term during the midterm elections year. In our view, Nasdaq will continue to rise until September and if Trump plays from the same playbook, we will see DXY making new lows next quarter followed by a bounce which will take out the current dealing range high.

May peace be with you all.

Disclaimer: Analysis done in good faith and is not investment advice. This is to showcase algorithmic price action only.