Forex Trading Guide for August 2020

The 2020 summer resembles some of the past years, even though the world is hit by a pandemic. If we talk about the FX market, risks had diminished and as a result, we’re dealing with typical market performance, characterized by tight ranges and low volatility. In case you are looking for a brief August 2020 forex trading guide, today we will cover some of the key aspects you need to take into account during the next few weeks.

forex trading guide

# Summer conditions as usual

Major currency pairs such as EURUSD or GBPUSD had moved on the upside, supported by US dollar weakness. Europe had been coping well with the pandemic and as a result, risk assets had been favored. FX volatility on the most popular pairs remains low, but keep in mind that a resurgence of infections, combined with new restriction measures have the ability to reverse the course.

We already see rising COVID-19 cases in countries like Germany and Australia, proving the virus is far from being under control and any “going back to normal” is postponed until an effective cure will be found. Watch for any drop in risk appetite, because that’s the main headwind for FX in the near term.

# Exotic pairs more active

Since FX conditions had not deteriorated, major pairs had performed in a tight range, and no major event occurred, exotic pairs had been performing better during the past few weeks. It is typical to see this happening during the summer, as some investors enter the holiday period. Even though daily ranges are wider and thus traders can find more opportunities, the combination of low liquidity and any sudden spike in volatility will be one of the key issues to consider.

# Compressed trading conditions until activity returns in September

Alarm bells are ringing as the world continues to face the pandemic and a severe economic downturn. However, for now, things are not crumbling, which means trading conditions could remain the same in the next two weeks, with nothing notable expected to occur.

Once September kicks in, we should expect to see more volatility in the popular FX currency pairs and that would be good news for short-term traders. The markets are still driven by emotions so it would be of great importance to look at technical levels and respect them. August is a textbook month for FX traders, but that does not mean they should let their guard down in an environment like this.

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