Mind the Month End Flows
Skerdian Meta • 2 min read
Today is that time of the month again, guys. It´s the last day of November so month-end flows are in full swing. I almost forgot about it, but the forex market never does. The moves in most forex pairs look quite irrational today and it was the same price action yesterday. We saw the USD lose ground yesterday despite the great US Q3 GDP, so the market won´t let you forget about anything.
We saw another such occurrence take place this morning as well. GBP/USD was having another go at the top side a few hours ago when the price moved above the 1.25 level several times since the big fall. But, just an hour ago, the price made a brutal reverse out of the blue. Nothing on the economic calendar and I can´t see any forex related events anywhere in the financial websites.
That leaves us with just one option, month-end flows. We have mentioned it many times before that the international companies and other organizations make payments and transfers on the last day of the month, which recently has spread to the last several days of the month.
The big red candlestick on the 1 minute GBP/USD chart tells the story
That´s what happened to the GBP pairs. GBP/USD lost about 100 pips in an hour, but the thing to notice was the 50 pip decline in just one minute. That tells you about the nature of these month-end cash flows. An institution based in the UK makes a large international payment and all the hard work the GBP bulls have done goes up in smoke just like that. This is the world of retail forex.
In fact, this GBP move started in EUR/GBP, so the chances are that the UK government has paid its monthly tribute to the EU. The monthly tribute that the UK pays to the EU was one of the main reasons the Brexit camp won, but in my opinion, I don´t think this will end when the UK finally leaves. By the way, we are keeping short term signals low today so we don´t give back the profit we have made so far this month.