Using USD as a Base Currency (USD/xxx) we are able to analyze and isolate the Sentiment of the USD.
Currently with Sentiment - The best looking singnals for USD long are going Short EURUSD and Short AUDUSD. USDJPY is also in the Strong Buy zone but the charts don't look as attractive as they have experienced a run up already. Why are we looking for longing the dollar? See below.
This type of Impulse Move when the expectation is to make a newer low is a indicator from my experience that something has changed.
Some people will refer to it as a flag pattern. The expectation is a lower low but when you see strong Buying like this and the close is near the High... the MM's have tipped their hand. We can also see that if looking at it from this perspective that prior shorts on the Daily Time Frame exited before price moved upward.
Price seems to be targeting the LH stops above.
EURUSD is one of the major weights in the DXY index. So it's no surprise that the price is usually somewhat inverse to it.
What I like about this chart is that by projecting out the latest swing, we can see that all 3 levels of Stops are in our Ideal Target Area (between 0 and the 1.6 extension... or -0.6 using trading view)
AUDUSD is very similar to EURUSD here. It has a similar pattern and the Stops are located perfectly within our ideal target areas.
These are the two MOST interesting pairs currently to trade this week. Short EU and AU.
Basket Sentiment for EU and AU is strongly aligned with the above analysis even though Market Structure isn't there yet.
The Impulse Move on the DXY is the Market Makers tipping their hand and trapped shorts are likely to get taken out.
Also - Make sure that you check out the new material in the SentiFX Beginner course on SWOT Analysis.
In this instance, a Weakness and Threat to the trade is that Market Structure is not aligned yet.
If you're going to take the trade, go through your SWOT analysis and see if this trade suits you.
Personally the IM where sellers were getting in for days (creating a Bullish Flag) on the DXY chart is a positive for the trade, especially closing so strong in the upward direction. I believe this is MMs tipping their hand.
Trade with Edge, Trade Well -