Forex sentiment analysis is the study of market participants’ attitudes and expectations towards a particular currency pair by analysing certain sentiment indicators and reports.
These indicators and reports offer valuable information into the overall positioning of traders in the currency market.
Simply put, the main goal of market sentiment analysis is to figure out what the majority of the ‘crowd’ is thinking about a currency pair. Are they predominantly bullish or bearish?
Forex traders generally analyse the overall sentiment by looking at the positions of all traders in a market, and how their positions change on a daily or weekly basis, to get a better ‘feel’ of where currency prices might be heading in the future.