Advanced Forex Blog

Can Traders Use Seasonal Tendencies in Forex

February 6, 2022 | 4:15 pm | Advanced Forex Blog
February 6, 2022 | 4:15 pm
Advanced Forex Blog
Can Traders Use Seasonal Tendencies in Forex

Seasonal Tendencies in Forex

There is a lot of data to look at when making trading decisions. Even more charts and numbers come to play when professional analysts work on strategies with a technical approach. However, so many complex statistics may drown some easier data to grasp. We are talking about seasonal tendencies in forex as an interesting factor to consider.

Let’s clarify from the beginning. No observations of seasonal trends could substitute technical or fundamental analysis. Also, the forex market is as subject to unpredictable changes and ‘black swans’ as any other. So, be reasonable and well-informed. Now to forex seasonal tendencies!

 

New Approach to Trading Strategies

A tiny deal of attention would allow noticing some repetitive cycles on the markets for routine purchases. Higher demand for festivity goods raises the prices before holidays, and the opposite happens right after them. Depending on the region, the end of winter may show higher prices for groceries with fewer stocks left. The same is true for traveling and related services.

So, the forex market is not that different and has its own trends for ups and downs. However, they are not that easy to spot with traditional chronological evaluation. Comparing consecutive data would show the overall tendencies for a given currency or a pair over a specific time period. But if we take data for the same month over 5, 10, or 15 years, some tendencies show up. For some forex pairs more than for others, it becomes evident that there are pick months and bad months in the trading of currencies.

Charts would look different for different currency pairs, so we’d go into details with specific examples. We’ll take the three most traded currencies and look at the seasonal trends they show.

 

EURUSD – Good and Bad Timing

With Euro being the second most used currency in the world, it’s no surprise that the EURUSD pair is also one of the most popular for trading. Although the state of the market for these currencies strongly depends on the economic cycle, seasonal tendencies are visible over long time periods.

The chart below shows the performance of EURUSD during the year over 10 years. Numbers on the vertical scale show percentage of failure or raise of the price. Long-term patterns of the forex market arise in such overview, allowing for tendencies’ observation.

 

EURUSD performance over 10 years

 

As visualized by the chart, there are several rather stable trends over the years for the EURUSD pair:

  • Mid-February to the beginning of March show the bottom
  • The end of April marks the upward tendency
  • May and part of June are close to the worst periods for Euro 
  • The end of August demonstrates downward moves with further raise in September
  • With visible fall in November, there are indications for raise towards the end of the year

It is advisable to be aware of data inconsistencies that happen for some of the timeframes, which don’t allow for conclusive observations for trading decisions.

Trading Seasonal Trends for USDJPY 

Japanese yen is the third most traded currency after the US dollar and Euro, so around 16% of forex operations include JPY. It is interesting that recommended method for evaluating seasonal trends for the yen is to examine trends for JPYUSD futures first. Such an approach would show high points of yen futures, which usually correspond to low points for USDJPY forex.

The two charts below perfectly demonstrate this correlation between yen futures and JPYUSD forex on one hand, and inverse relation to USDJPY on the other. 

 

yen futures and JPYUSD 1

 

yen futures and JPYUSD 2

 

To avoid confusion and mistakes, it is better to use only one chart at a given moment, depending on your trading goals. As many investors look for USDJPY forex trading, we summarise seasonal trends for this currencies pair:

  • April shows the fall for USDJPY with raise in May to follow
  • Rallies over summer conclude in a significant decline in August which can continue till October
  • The beginning of November marks the temporary uplift in this currency pair

Considering positive trends for yen traders over 2021, it would be wise to look at seasonality as an additional tool for evaluation before investing.

 

GBPUSD Seasonal Trends

As Pounds have been traded against the US dollar the longest, there are quite convincing data regarding seasonal tendencies for this pair forex trading. Unlike the JPY case, there is a direct relation between GBP futures and respective forex.

The chart below shows the tendencies for the GBPUSD forex pair over the last 10 years. However, you can rely on longer timeframes to detect more nuanced trends in a given month of any year.

 

GBPUSD

 

Allowing some generalization, here are the most convincing seasonal tendencies for this pair of currencies:

  • The end of February-beginning of March is the weak spot for GBP.
  • GBP hits the bottom first part of May and goes up closer to the end of the month.
  • The end of July and the beginning of August show downward trends.
  • Early September demonstrates GBP peaking with a fall at the end of the month continuing until late November.

Benefit from good data available for this currency pair when making your trading decisions.

 

Seasonal Tendencies in Forex Summary

The topic of seasonal trends is quite fascinating, especially for a novice trader. Up- and downward tendencies at the end and beginning of the year are easier to grasp and explain that some complex technical analysis. But it is important to keep other factors in mind and not rely on any of them individually.

Seasonal trends in the forex market, in most cases, are the result of general demand and supply balance for goods market. But these tendencies can also correlate with unknown market forces. Therefore, looking at longer periods in time would be a safer way to conclude on a seasonal trend.

Do your homework before deciding on a currency pair and the best timing and invest wisely.

 

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Author Bio:

Charlie Svensson is a fast, engaging freelance writer with vast experience in dissertation services. As a pro essay writer and content creator, he successfully reaches diverse audiences. The favorite topics of his texts are education, social media, marketing, SEO, motivation blogging, and self-growth.

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