One of the relationships I cover in my free forex webclass is that between oil and the Canadian dollar, and it has never been more important following today's dramatic price action for both crude oil itself and broad market sentiment. So with equity markets in free fall along with oil, the CAD/JPY pair has delivered some wonderful trading opportunities, along with several others in the Canadian dollar complex. The combination of risk-off and oil has driven the pair lower still following the gapped down open under heavy selling as seen on the daily chart. Over the next few days it will be a question of watching the related markets of oil and equities for any recovery in the Canadian dollar.
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It's been a day of weakness for the Aussie yen as risk-on sentiment evaporated once more, with markets remaining fragile and nervous as each day reveals fresh news on the current virus sweeping the globe. As a barometer of risk the AUD/JPY is always one currency pair that reveals this sentiment clearly, with the Aussie dollar considered a risk currency and the Japanese yen a safe haven. This weakness was signaled earlier in the week with the failed effort to rise on high volume and now followed by a bearish engulfing candle.
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The crossover sessions in forex occur when trading in one timezone closes and another opens and can be a very dangerous time for traders. Why? Because this is where insider traps are set. The London open always is a fertile ground and there was a great example on the usd/jpy.
Heavy buying in the pair on the previous day resulted in a nice move higher in Asia with the pair moving into consolidation ahead of the London open.
Prior to the open the pair started to move higher on reasonable volume but reversed lower at the open on high volume until the hammer candle, again on high volume pushed the pair back towards the consolidation (the yellow line on the chart).
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