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Currencies react to global risk sentiment in fairly consistent ways, although the relationships shift over time.

Typical behaviour:

• Risk-on: AUD, NZD and emerging-market currencies strengthen; JPY and CHF weaken.
• Risk-off: JPY, CHF and often USD strengthen; commodity currencies weaken.

Indicators of sentiment:

• Equity indices like the S&P 500 and Nasdaq.
• The VIX volatility index.
• Credit spreads and high-yield bond prices.
• Gold and Treasury yields.

For intraday traders, a sudden drop in equity futures can explain a JPY move that appears unrelated to any news.

The relationships also change during specific episodes. In some periods USD behaves as a risk currency, in others as a safe haven. Checking how USD reacted to the last few equity sell-offs helps judge which regime applies now.

Which sentiment indicators do you watch during your session?

The point about checking how USD reacted to recent sell-offs is the part I use most. I keep a running list of the last five days when S&P futures dropped more than 1.5 percent intraday, and note what EURUSD and USDJPY did in the same hour.

Over the spring, three of five showed the dollar firming against the euro, so I treated it as a haven. Lately it has been mixed, and on two of the recent drops USDJPY fell while EURUSD barely moved, which reads more like a yen story than a dollar one.

During the session I watch only two things, equity futures and the US 10 year yield. The VIX lags the futures for my timeframe, and by the time it spikes the yen move has usually happened.

One edge case is month end. Flows around the London fix can push the yen against the sentiment read, and I have been caught fading a move that was only rebalancing.

Do you adjust position size when the regime is unclear, or simply skip the pairs where the signal is mixed? My habit is half size on AUDJPY until two sessions agree.