The forex market has slipped into a well-defined trading range. I suspect that the rangebound trading will persist throughout the summer.

The forex market will start focusing more and more on the U.S. elections, which might prove to be a major catalyst in August or September. To see how to play the U.S. elections, make sure to read this post:

It's Time to Start Trading/Tracking U.S. Politics

In between now, and the U.S. elections in November, the polls might have some sway on the U.S. dollar. But I don't expect a major move in the greenback in the next 30 to 60 days.

The forex market is dealing with a U.S. economy on the brink of recession, a slowing global economy, soaring commodity prices, and monetary policies that are in flux. The mixed signals and uncertainty are causing traders to be rather cautious and, consequently, leading to the rangebound trading in the majors.

Please read my post on how to deal with trading ranges if you're struggling to make a profit in this market:

EUR/USD Trading Range Strategies

In essence, I think it makes sense to shorten your time horizons and profit targets in this market climate. In general, it's smart to reduce your overall trading activity and wait for the forex market to come to you. Take only high quality, high probability, and low risk trades in this environment.

As an example, I observed a high probability set-up ahead of last week's Federal Reserve meeting in the EUR/USD. To read about the set-up, follow the link below:

Short-term Trade in EUR/USD Ahead of Fed Meeting

I provided a follow-up to the trade one day after the Fed's decision:

110 Pips of Profit in the EUR/USD Following Fed Meeting

Today, I'm taking full profits from this trade based on the EUR/USD's response to horizontal resistance near 1.5800. Just look at the daily chart below to see more.

EUR/USD Daily Chart Resistance, Point and Figure Chart Resistance, and Overbought Stochastics

The inside day triggered a buy signal near 1.5620, plus or minus 20 pips. I'm comfortable taking profits near 1.5750, plus or minus 20 pips, for a profit of around 130 pips. You might have gotten closer to 200 pips in profit if you exited above the 1.5800 horizontal resistance.

The point and figure charts are showing strong resistance at the 1.5800 level. Additionally, the Full Stochastics (5,3,3) are in overbought territory and starting to rollover.

So, we've got three signals working against the EUR/USD, which is enough for me to take profits in existing long positions. In fact, I might look to short the EUR/USD in the next 24 to 48 hours, if it continues to stall near horizontal resistance at 1.5800.

So, you see, this is an example of how to trade a tight range between horizontal support and resistance. I want to be buying near the lower-end or mid-point and selling near the upper-end or mid-point of the range. You've got to be extremely flexible and adaptable; also, you need to be able to watch the market pretty closely. But this is one way to deal with the tight trading ranges in the forex market.

I know that 150 pips, plus or minus 20 pips, isn't a huge profit. But at least it's something in a market that isn't presenting a whole lot of opportunity.