Another forex trading session of strong moves, and reinforcing once again the importance of understanding how currency markets reflect related market sentiment and the inter-market relationships which drive sentiment and risk. Overnight saw some wild swings in sentiment, with gold rising sharply before falling with the reverse of this pattern of price behaviour seen in US indices on Globex which plunged before rallying, and all driven by news flows surrounding the ongoing tarriff wars. Politics is now playing an increasingly dominant role in driving the forex markets as risk on and risk off sentiment oscillates with the US, Europe, the UK and Japan all playing their part.
As Europe opened with London then following, it was the euro which developed a strong move higher and counterbalanced with selling of the US dollar, and neatly reflected on the EUR/USD. The currency indices also described this price action perfectly and a clear example of choosing the pair trading with momentum. This was in sharp contrast to the British pound, and whilst this was also selling off, the pair to choose here was the EUR/GBP. This was clearly shown on the currency matrix alongside the currency strength indicator, with the market universally buying the euro across the complex. In addition, the GBP and USD were falling together with the currency strength indicator clearly signalling which pairs to select and which to avoid for the time being.
Finally from time based charts we moved to the renko indicator which is a terrific charting technique to smooth out the price action and help to get you in and keep you in. The indicator can also be used in conjunction with other indicators including the trend monitor, the trends and the support and resistance indicators for MT5, and all helping to confirm the trend, or areas where the price action was likely to struggle. And once more it is the euro and EUR/USD which describes this perfectly.