The Last Trading Day of the Month
Today is May 31st which makes it the last trading day of the month. The first day of the month, but particularly the last day, is always quite tricky to trade forex. It gets even trickier if the last day of the month is the last trading day of the quarter such as March 31st, June 30th and so on. But why is that? That´s because there is cash flowing from one country to another which affects currencies. Multinational companies transfer cash from their branches or subsidies to their mother company (or vice versa), but the former is more common.
Countries and multinational corporations move cash around in the last trading day of the month
Large companies which own vast amounts of money are multinationals. They square their financial sheets and close deals on the last day of the month or the last day of the quarter. Besides that, there are money transfers between countries which take place on the last day of the month as well. For instance, the UK pays about two billion GBP a month to the EU as a member obligation and that´s done on the last day of the month. In forex, this means buying EUR with GBP. That affects EUR/GBP in particular, that´s why this pair gets underpinned in the last trading day of the month. Today, since the European session started EUR/GBP is about 80 pips higher. In such cases, it is difficult to trade forex because you never know at what time the move is going to take place and how large it will become. We were caught on the wrong side of the market many times in the last trading day of the month with our forex signals. Therefore, we have come to the conclusion that it´s wiser to stay on the sidelines during these days and minimize our forex signals.
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