How Does ICT Use the Dollar Index for Intermarket Analysis? | 2022 ICT Mentorship Episode 21

TL;DR

The dollar index helps establish market bias because a rising dollar signals a risk-off environment that pressures foreign currencies and stock indices lower. In Episode 21 of the 2022 ICT Mentorship, ICT connects the dollar’s move from around 99.92 toward relative equal highs and objectives near 102 and 103 with weakness in the e-mini S&P. Read on for the specific relationships, levels, and seasonal signals used in the analysis.

Transcript

all right folks welcome back this is our 21st episode of the 2022 free ict youtube mentorship little tongue twister there so we're looking at the hourly chart on the dollar index why are we here why are we looking at this well i'm looking at this because i want to show you the relationships between a risk on and risk off market if you've been follo... Read More

Key Insights

• The dollar index moves inversely to foreign currencies: dollar up means foreign currencies decline, and dollar down means they rally, because a rising dollar is a risk-off flight to quality.
• Risk-off scenarios imply most other markets and asset classes decline as money pours into the dollar as a safe haven and out of risk assets like foreign currency.
• The e-mini S&P showed an inverted relationship to the dollar, declining as the dollar created its important low, confirming intermarket analysis across universally applicable concepts.
• A bearish order block has defined levels: the low, the open, the mean threshold at the halfway point, and the high, with the high being the level least likely to be traded to.
• The trader forecast the dollar index dropping to around 99.92, then running relative equal highs higher toward objectives near 102 and 103.
• May is a seasonal decline tendency, which combined with a daily bearish order block warranted looking for downward pressure in the e-mini S&P toward relative equal lows.
• The trader admitted an error: he expected one more spike up toward the 4320 level before rolling over lower, but that rally did not happen.
• New York local time resolves all daylight savings confusion: toggling TradingView to New York time and tracking a New York clock removes uncertainty about session timing like the 3 a.m. London open.

Questions & Answers

Q: How does ICT use the dollar index for intermarket analysis?

ICT uses the dollar index to assess whether markets are in a risk-on or risk-off environment. A rising dollar supports a risk-off bias, making sustained declines in foreign currencies and stock indices more likely, while a falling dollar supports strength in foreign currencies.

Q: How does the dollar index affect foreign currencies?

The dollar index and foreign currencies generally move inversely in this analysis. Dollar strength pressures foreign currencies and makes sustained rallies less likely, while dollar weakness makes foreign-currency rallies more likely.

Q: What does a risk-off market mean in ICT’s analysis?

A risk-off market occurs when the dollar is rising and money moves toward it as a flight to quality or safe haven. ICT says this generally pressures other markets and asset classes, including foreign currencies and stock indices, to decline.

Q: What dollar index move did ICT forecast?

ICT said the dollar index would likely fall to around 99.92 before rallying through relative equal highs. He identified further objectives near 102 and 103.

Q: What relationship did ICT identify between the dollar and the e-mini S&P?

ICT identified an inverted relationship between the two markets. As the dollar formed its important low and moved higher, the June 2022 e-mini S&P futures contract moved lower.

Q: What levels define the daily bearish order block?

The referenced levels are the order block’s low, open, mean threshold, and high. The mean threshold is the halfway point, while the high is described as the level least likely to be traded to.

Q: How did May seasonality affect the e-mini S&P outlook?

ICT said May usually has a seasonal tendency toward decline. Combined with the daily bearish order block and a rising dollar, that tendency supported looking for downward pressure toward the relatively equal lows on the daily e-mini S&P chart.

Q: Does ICT apply this dollar-index analysis to cryptocurrency?

ICT says his concepts are universal and that some students report using them in cryptocurrency, but he does not personally endorse that application. He states that he has zero cryptocurrency trading experience beyond a demo or paper account, has never opened a crypto account, and specializes in forex and futures.

Summary & Key Takeaways

• This 21st episode of the 2022 free ICT YouTube mentorship examines the hourly dollar index chart to teach risk-on versus risk-off relationships. A rising dollar signals risk-off, a flight to quality that pressures foreign currencies and index markets lower, giving traders directional bias through intermarket analysis.

• The trader recalls publicly forecasting the dollar index dropping to around 99.92 before rallying toward 102 and 103 objectives. He connects this to a daily bearish order block on the e-mini S&P and a seasonal May decline, expecting price to reach relative equal lows as the next draw on liquidity.

• He transparently admits a missed call: he expected one more spike toward 4320 before a reversal lower, which did not occur. He also explains power three, the New York midnight opening price, the 3 a.m. London session, and resolving daylight savings by setting TradingView to New York time.