The GBP/USD is many people’s favorite currency pair to trade, but as you may have noticed, this particular pair has been pretty hard to trade in recent months. So why is this?
Well there are a few reasons. First of all it has to be pointed out that many of the forex pairs become a lot harder to make money from during the summer months because many traders are on holiday and volumes naturally drop off.
Therefore intraday price movements tend to be a lot smaller, and that’s certainly been the case with the GBP/USD pair because the average true range indicator (which is a good indication of daily price movements) has been falling since May and is now below 100 points.
This isn’t the sole reason why this pair has been a lot harder to trade, however, because 100 points movement a day is not bad at all when you consider that it was barely trading in a 50-60 point range this time last year.
I think the real reason why people have struggled to generate some decent returns from the GBP/USD pair is because if you look at the daily chart, you will see that the 200-day exponential moving average has been moving sideways since the start of May (indicating a trendless market) and has barely moved away from this key indicator at all since then.
Subsequently traders who trade off the 4-hour and daily charts may well have struggled to make money from this currency pair this summer because price moves in either direction have tended to fizzle out fairly quickly, and short-term traders may also have found it difficult because of the reduced volatility.
So you need to be aware of this if you continue to trade this pair during the rest of summer, but it’s worth pointing out that there are other pairs that are more volatile and are in much stronger trends right now, even though volumes will be lighter for all pairs.
Plus you can always trade other markets such as gold, crude oil and the Dow Jones / FTSE because these have all been very lively in recent weeks.