Trading forex? Here’s the seasonal trends of forex market that you better know. Once you start to learn Forex, you are likely to learn every single basic thing and other things related to the Forex market and trading. When it comes to the Forex market, there is what is called as seasonal trend that every trader needs to know. This is because the trend can heavily affect how a trader forecast the price of the market.
Must-Known Seasonal Trends in the Forex Market
When we are talking about the market of foreign exchange, we cannot deny that traders in this market mostly determine one of two options: anti-dollar or pro-dollar. As dollar becomes the most traded currency in the market, it has become the primary driver of the exchange rate’s fluctuations. To analyze the fluctuation of dollar, most traders will use either technical or fundamental analysis or both.
Nevertheless, certain time of the year can also play a big role in how the USD performs against other currencies. If you are technical trader who usually analyzes activity of the past price using indicators, the seasonal patterns of the price throughout the year can be another indicator to take into account. To help you, here are some of the seasonal trends to learn.
#1 July: An Optimistic Month for USD/JPY
One of the most powerful instances of seasonal trend in the Forex market is the USD/JPY which shows a positive trend in the month of July. When you take a look to the chart of this currency pair throughout the year, you tend to find that USD/JPY ended in July is higher than where it begins. However, there is no precise reason why for it.
Even though there is no exact reason about the positive trend of this currency pair in July, it is still important for you to keep it in mind. In this case, this seasonality presence might give confidence to traders for taking smaller short position than usual or to prevent a longer term short of this currency pair throughout the period.
#2 August: USD/JPY Increases in July Frequently Erased
Then, there is a powerful case of seasonal trend in USD/JPY during August that you should keep in mind. Although there is a positive portion of gains created during the month of July, it is frequently erased in August. In this case, it is highly influenced by the strong JPY in August. As a result, other currencies like USD, British and Euro tend to fall.
#3 May: A Downbeat Month for the USD/CAD
When it comes to USD/CAD, May should be the month to be noted. The most powerful seasonality case of the USD/CAD is in October and November. On the other hand, this currency pair tends to have a negative trend during the month of May. Similar to the other trends presented above, it is important for you to take this into account as forecasting indicator.
The Implications of Seasonal Trend for Traders
As a Forex trader, there are actually a lot of ways on how you can apply the seasonality knowledge to improve your forex trading strategy. For instance, if you would like to trade GBP/USD in September, if you are a longer-term trader, you can search for opportunities on using technical or fundamental to purchase this currency pair or to follow the seasonal trend direction.
On the other hand, if you are a longer-term trader, you better concentrate on mainly searching for long GBP/USD trades. Even though seasonal patterns don’t usually duplicate themselves for 100%, following the reports of seasonal trends can still increase your ability to discover high probability trades. Lastly, don’t forget to learn Forex continuously to help you master the Forex market well.