UNDERSTANDING SENTIMENT IN THE FOREX MARKET.

There is a cycle in the forex market that explains why the prices of currencies move all the time.
The forex market is constantly being driven by sentiment and fundamental drivers.
Sentiment is the mood of the market. By the mood of the market, i mean in a particular trading session, the market can be fearful or scared as a result of some bad news that happened the previous session. On the other hand the market can also be optimistic and willing to take risk.
In the first instance, when the market is scared or fearful it tends to go risk-off and therefore results in a flight to safety. In this case you will notice that currencies such as Japanese Yen and the Swiss franc become the strongest currencies for that session. This is because in the Forex market, these two currencies are considered to be the safest currencies to invest in, in times of uncertainty and turmoil.
In a particular session when there is no uncertainty or nothing to be scared of, the market is willing to take on risk, therefore flock to high yielding currencies such as the Australian dollar and new Zealand dollar.
So there you have it, the next time you hear or read in the news that there is uncertainty in the markets as a result of tensions between two nations, you instinctively know which currencies will likely move a lot.