Does anyone know why currencies trade within a fixed daily range under normal circumstances? While we all know, without a doubt, that currencies (not just currencies but stocks, futures, commodities, etc) tend to trade within their historical daily ranges, what's to stop them from trading within a 150 pips range today and a 20 pips range tomorrow?
12 years ago, when I first started fx trading, euro's average daily range was 100-120 pips. Dollar Yen's was 80-100 pips. And you would see Euro Yen and Pound Yen averaging 150-180 pips. Wow good times. With the fall in volatility, the daily ranges have decreased by a good 20% over the years.
What's the reason for currencies falling in line so systematically? Is it the human need for familiarity and control? Is it a self fulfilling prophecy? Well for some currencies, we see government intervention. But for other non manipulated (at least what we would like to believe) currencies like euro, pound, etc, they move and trade as a result of market forces and market participants. Even if there's outflow of money from the fx markets to crypto or equities, volume don't fully account for that.
Anyone with insights? Would love to hear different perspectives.
12 years ago, when I first started fx trading, euro's average daily range was 100-120 pips. Dollar Yen's was 80-100 pips. And you would see Euro Yen and Pound Yen averaging 150-180 pips. Wow good times. With the fall in volatility, the daily ranges have decreased by a good 20% over the years.
What's the reason for currencies falling in line so systematically? Is it the human need for familiarity and control? Is it a self fulfilling prophecy? Well for some currencies, we see government intervention. But for other non manipulated (at least what we would like to believe) currencies like euro, pound, etc, they move and trade as a result of market forces and market participants. Even if there's outflow of money from the fx markets to crypto or equities, volume don't fully account for that.
Anyone with insights? Would love to hear different perspectives.