DXY Analysis and forex insights 1/11/2025
This is the daily chart fo the DXY. The vertical lines represent the start of each new quarter. We have marked the Q2, Q3 and Q4 quarters. During the Q1(not shown) and Q2 quarters, the DXY price was falling. Then in the Q3, price started to consolidate in a broad range. The Price then goes below the low of the quarter and immediately reverses. This is the liquidity purge. Once the candle closes bullishly we can look for higher prices and target opposite liquidity. It is important to remember that this does not happen all the time and so we have to constantly reassess our bias depending on the price action. The daily chart provides a broad enough context to use it for intraday and swing trades. The blue zone we have marked has been there for quite some time. This is a fair value gap. This acts as resistance when the price is below the gap and offers support when the price is above the gap. We can see that price went all the way to the top of the gap then retraced below. It then started consolidating at the bottom of the gap. This confused me and i thought that the dollar will get rejected from there, even though prior to this, i was bullish. The DXY however rallied after the FOMC and it has now closed above the gap. So as long as we do not close below the 99.30 line on a daily basis, we should look for longs on DXY. This would mean ( longs on USDJPY and shorts on GBPUSD and EURUSD ) until we take the Q3 HIGH which is 100.30 There is potential for price to go to the blue shaded box at 101.20 and take out the Q2 HIGH. But we have to reassess price action after the Q3 HIGH is taken. Again a close below 99.30 will negate the bullish bias on the daily.
USDJPY DAILY CHART ANALYSIS:
The above is the USDJPy daily chart for the year 2025. When we visualise the chart in terms of quarters, it gives a broader context and help us develop a bias and narrative for the next move. We look at the chart through the eyes of liquidity. During Q1 and the early part of Q2 we had distribution and the price was moved down. We make a bottom in Q2 which if we overlay the nasdaq chart will match the bottom made by Nasdaq. This is evidence that the carry trade is alive and well. After the Q2 low, the price is in a broad range followed by a narrow consolidation in Q3. This is where the market makers accumulate their positions. Liquidity builds on both the top and bottom of the consolidation and often times like here, we had a stop run where price moves lower and takes out the liquidity below before moving aggressively higher. At Muffett investments we were participants of this move. But we had a deep retracement of the move which confused them. That is what the market makers want. They dont want other people to participate in the move.
We are now in Q4. We think that the price will be moved aggressively to the liquidity residing above the Q1 HIGH. Yes we may have stop runs and the market makers will attempt to shake out weak hands. But as long as price does not CLOSE below 153.10 on a daily basis, this analysis is what we will hold on for. We will look for longs on any retracement. see the chart below.
See how we have a big candle on thursday 30/10/2025. Then we have a consolidation day on Friday 31/10/2025. This leaves a fair value gap shaded in blue. If the price is very strong, then price will never come to this zone. If the price comes to the blue zone and immediately rejects, then price is strong. If the price closes below that zone on a 4 hourly basis then the price is weak. If the price closes below 153.10 on a daily basis, then the bullish bias is invalidated. The target for the longs is 158.82 and 160.
GBPUSD ANALYSIS:
We present 2 charts. The first one is the GBPUSD 4 hour chart. Price is extended to the downside and price has reached a liquidity zone. There is a very good chance of a bounce. We think that the best place to short would be in the blue shaded area we have outlined as the short zone. The short line is 133. If we look at the weekly chart above, the 50% retracement lies in the region of 1.2941. GBPUSd is used for manipulation purposes. Also if we compare the GBPUSD and DXY weekly chart ( not shown here) the DXY bounce from the lows has been weak. So we should be cautious of overt bearishness of GBPUSD. There is a chance that once the Q3 high is taken on DXY price might reverse. This is the reason we have to constantly reassess our bias depending on the price action.
*Disclaimer: Analysis done in good faith and this is only for educational purposes only. Muffett investments are nor liable to investment losses based on these analysis. The blog post is for journalling Muffett’s Algorithmic trading journey.
