Briefly introduced in the earlier section is the concept of market sentiment, which involves gauging whether traders are in the mood to take on more risk in their portfolio or not. This is relevant in the forex market because higher reality currencies for those with Central banks offering higher interest rates enjoy stronger demand when risk is off. Risk on or periods of market risk appetite refer to those instances and traders are more confident about Global economic performance and prospects that they are in in pursuit Of Higher yields generally carry a greater amount of risk. On the flip side of of or periods of market risk aversion include those times when traders are Pessimistic about Global economic performance and prospects pausing Dam to be more questions and in favor of lower building safe haven assets. All of this writing, the major Economics that offer higher interest rates are Australia New Zealand and Canada aside from the fact that A committee currencies are also sensitive to global economic performance the Australian Dollar New Zealand dollar and Canadian Dollar also enjoy significant higher interest rate differential from other major currencies such as the US dollar or Japanese yen with that come dolls tend to rally when risk is on while the greenback and benefit from the risk aversion. Lower interest rates do not currently safe haven status though, as the euro is a prime example of a currency with a low interest trade that is not considered as a a fight to safety option even though The European Central Bank already offer the low interest rates, the likelihood is that for the easing measures or interest rate cuts can be implemented thereby giving the possibility of lover returns on euro Holdings. Aside from looking at equity in performance or monitoring the Global economic trade and other ways to gauge market sentiment is to look at the commitment of traders reports as released by the cftc or committee futures trading Commission this weekly report indicates how many commercial and non-commercial traders are long or short the major currency pair. II with this strategy trader usually focus on extreme short or extreme long position in order to this market top or bottom man traders are extremely short on a currency there is no one left to sell which means at the market will eventually turn when traders are extremely long on a currency there is no one left to buy which means that price could eventually fall. To get these figures, you simply have to visit the CF TC web page and look for the pot report then view the short format. Just look for the currency you are interested in to see the current Positioning of traders it also helps to compare to the previous week's report to see if more short or long position was added sudden shift in Positioning could also be a sign of a market reversal. Thanks
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