The GBP/USD currency pair witnessed a negative reversal on Monday, closing under the key support at 1.3300 during the European trading hours. The drop comes in the midst of unusually thin trading conditions. This slowdown is partly explained by May Day holiday, which often brings reduced activity on the market.
As traders assessed market movements, GBP/USD struggled to maintain its previous gains, reflecting a cautious sentiment among market participants. The duo had previously looked promising, but with little trading volume behind it, its rise quickly came crashing down. Many analysts feel these types of swings are the norm during holiday weeks when most traders are away from the markets.
Thin trading conditions will be the order of the day as the May Day celebrations stretch into a third week. This changing situation is compounded to the dynamics of the GBP/USD pair. All traders should be careful, as sources of market volatility can emerge suddenly, even in thinly-traded conditions.
Whatever the reason, market observers point out that the currency pair has been extremely reactive to macroeconomic developments. Whatever news may be coming will raise the temperature considerably when trading returns in earnest after the holiday recess.