Posted at fxstreet.com, second post.
Risk On or Risk Off Currency Markets: CAD/ZAR, AUD/CAD, CAD/JPY, EUR/JPY.
To determine not only the health of currency and all markets in general in terms of risk on and risk off exposures, four preeminent pairs were designed as forward indicators to assess the type of markets traded currently and possibilities for the future. Not only are the general risk on , risk off scenarios established as insights into other currency pairs but the four pairs serve as considerations into the commodity complex. The four pairs are CAD/ZAR, EUR/JPY, AUD/CAD and CAD/JPY.
CAD/ZAR. The ultimate risk determinant pair because it shares constantly perfect negative correlations to EUR/USD. CAD/ZAR trades currently at 11.43 and big breaks are found at 11.49 and 11.31. Overall CAD/ZAR rests on solid support at 9.2212. Intraday, 11.49 and 11.31 decides long and shorts as prices inside the range is risk neutral. Until 9.2212 breaks, risk off markets not only dominates the current trading condition but any rises in risk currency pairs or risk financial instruments are corrections.
EUR/JPY. Big intraday breaks are found above at 126.34 and 126.38 and 124.28 below. EUR/JPY failed to break higher after Fed statement release. Current risk is neutral inside the 124.28 – 126.34 range. Why EUR/JPY as a forward indicator is due to its multi decade distinction as the most widely traded cross among every cross pair on the planet. The number two pair is a far distant second.
AUD/CAD. From current price at 0.9568, the next breaks below are 0.9549 and 0.9429 then above at 0.9817 and 0.9893. Price trades inside the range and the neutral condition conforms perfectly to the same assessments as CAD/ZAR and EUR/JPY, risk neutral. Release of Fed statement experienced no breaks in the ranges.
CAD/JPY. From current price at 88.49, vital breaks are located at 89.12 and 90.12 above and 86.33 below. Release of Fed statement again failed range breaks.
Four of the most prominent financial instruments ever traded reveals the current market both intraday and longer term trades in classic risk neutral positions. The market order lacks trends and range trading is the preferred method until risk pairs break neutrality.
Brian Twomey, Inside the Currency Market, btwomey.com