Introduction to the EUR/GBP Pair
The EUR/GBP has always been a fascinating pair to watch, even if you have no interest in forex trading whatsoever.
That’s because it obviously shows the strength of the Euro against the Pound, and is therefore of interest to both British and European citizens because it affects the price of their overseas holidays, for example, as well as many other things.
It is also of political interest, particularly right now, because it reflects how Brexit is affecting the British pound, and can be used by both Brexiteers and Remainers to add weight to their arguments for leaving and staying in Europe, depending on the overall price of this pair.
However in this article I really want to discuss the EUR/GBP from a trading point of view because someone recently asked me if the EUR/GBP is one of the easiest pairs to trade.
An Easy Currency Pair for Forex Traders to Trade?
I actually wrote a blog post about this very subject on a previous blog of mine back in April 2009, and at that time I highlighted several reasons why the EUR/GBP could be considered to be a relatively easy pair to trade.
For example, I said that although it was often overlooked by the majority of traders due to its lack of volatility, it still has an average daily trading range of around 80-100 points, which is more than enough to make decent profits if you have a solid trading strategy in place.
However if you fast forward to 2018, the same argument doesn’t really hold true because the average daily range is currently just 37.5 points, according to the ATR indicator.
Therefore it is significantly harder to trade because when you consider that you will generally only capture a fraction of this average trading range per trade, even with a breakout strategy, the spreads will really eat into your profits if you are using any kind of short-term strategy.
Any intraday price moves are generally quite small, and there will be many occasions when a move runs out of momentum after just 5 points, for instance.
Furthermore, even if you trade over longer time frames, it is still not a particularly easy pair to trade because if you look at the long-term daily, weekly or monthly chart, you will see that it has basically been trading in a sideways trading range since the middle of 2016 with no clear direction.
Yes the Euro has obviously strengthened against the Pound since the result of the referendum was announced, but it now appears to be waiting for a clearer indication of whether there will be a soft or a hard Brexit, based on the price action of the last few years.
One thing I did say is that the EUR/GBP is a slow-moving pair, which is beneficial from a day trading point of view because it gives you more time to enter and exit positions and analyze the price action. I also said that this pair conforms really well to technical analysis, such as RSI, Murray Math lines and clearly defined support and resistance levels, and I would say that both of these points hold true today.
However because of the drastically reduced intraday volatility, it is not as easy to trade as before because the trading range is just 37.5 points on average compared to 80-100 points previously.
Conclusion
The EUR/GBP is still a slow-moving pair that has tight spreads and conforms fairly well to technical analysis on various time frames.
Nevertheless it is no longer an easy pair to trade, as it once was, simply because the price doesn’t tend to move that much on an intraday basis, and even if you extend your time frame to the daily or weekly chart, you will see that is has been stuck in a sideways trading range with no clear direction for the last few years.
Indeed the average trading range per week has fallen from 200+ points at the end of 2016 to just over 100 points right now, which indicates that even the weekly price movements are relatively small and difficult to make money from.
Most forex traders need volatility and clearly defined trends to make consistent profits, and so on that basis, I would suggest that there are other major currency pairs that are easier to trade right now.
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