Navigating the Forex Shift! Explore how the JPY’s movement and CADJPY’s pivotal support at 107.50 signal a ‘Risk On’ return in our latest blog post. Uncover the potential path to 110.60 and what it means for your trades #ForexTrends #MarketInsight #CADJPY
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Risk on Returns in the Forex Markets
The forex market is a dynamic arena where global events, market sentiment, and currency strength interplay to create opportunities for traders. A key aspect of this environment is understanding how ‘risk on’ and ‘risk off’ sentiments affect currency values. Today, we’re delving into a current example: the behavior of the Japanese Yen (JPY) and its intriguing movement against the Canadian Dollar (CAD).
Understanding Market Sentiments: Risk On vs. Risk Off
In forex trading, ‘risk on’ and ‘risk off’ are terms used to describe global market sentiment. ‘Risk on’ refers to times when investors feel optimistic and are willing to take on riskier investments. In contrast, ‘risk off’ describes periods of uncertainty and pessimism, where investors flock to safer assets. The Japanese Yen is typically considered a ‘safe haven’ currency and tends to weaken when the market shifts from a ‘risk off’ to a ‘risk on’ mentality.
A prime example of this dynamic is observed in the CAD/JPY currency pair. The Canadian Dollar, often influenced by commodity prices and global trade dynamics, pairs interestingly with the more stability-seeking Yen. As of recently, the CADJPY has been finding support at the daily chart range lows at 107.50. This support level is critical as it represents a threshold below which traders might expect a bearish trend. However, the current market conditions suggest a different story.
With the market maintaining a ‘risk on’ sentiment, there’s a potential for upward movement in the CADJPY pair. If the price remains within the current range, avoiding a significant drop below the 107.50 support level, we could anticipate a move towards the range highs of 110.60. This movement would not only signify a stronger CAD against the JPY but also reflect broader market confidence.
The price on the chart has traded through multiple technical levels and some observations included:
- Daily chart shows support at 107.50.
- Daily chart resistance is seen between 110.60 and 111.00.
- H1 chart highlights a support zone at 108.70.
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