The summer is upon us. Traditionally this is a slow period for currency pairs. The forex market is still dominated by large banks and bankers. They, like other employees, like to take their annual holiday in the summer. Let’s take a look at a chart of the Euro to see the summer effect in force.
The rectangles on the chart above mark July and August, the two slowest months for many forex pairs. As can be seen on the chart above, trading activity tends to go down, volumes decrease and pairs usually trade in a range during this period of the year. Last year this wasn’t the case because we got some nice downward trend in the Euro. But going back several years, the effect is clearly visible. In fact if you want to see a similar trend during July/August like we had last year, you would have to go back all the way to 2008, at the height of the financial crisis.
The summer effect is starting to rear its ugly head this year as well. We’ve seen vicious reversals in most majors. For example today (July 7th) the Euro was down by 130 pips and then all of a sudden a rumor about Greece pushed the single currency higher by over 100 pips. Liquidity is low and even insignificant news can cause maj…
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