Volatility, sentiment and the currency matrix all explained

Volatility can be both a good and a bad thing, but when the volatility indicator is triggered you can be sure of one thing – expect the price to congest within the spread of the candle, and possibly reverse in due course. And in today’s forex trading session on NinjaTrader, the GBP/JPY delivered some classic examples on the faster timeframes with the 30-minute timeframes trumping price action on the 3 minute. As always, viewing one chart in isolation is dangerous, which is why using multiple timeframes is so important since signals in a slower timeframe carry greater weight than those in a faster timeframe.

Focusing on the Japanese yen also brought the currency matrix indicator for NinjaTrader 7 into sharp focus, with two key points. First, the weakness in the GBP/JPY in terms of its ranking on the ladder, and second the meaning of the numerical ranking which can then signal whether a currency pair is reaching an overbought or oversold state on the index. Here we could see the GBP/JPY was an ‘outsider’ from the other yen pairs, and one in particular, the EUR/JPY delivered some solid trading opportunities.