EUR/USD: Seasonality Factors in Play?

The EUR/USD has fallen close to 4 percent or 600 pips since the beginning of the year. Although fundamental factors are certainly in play, there are seasonal factors as well.

Back in December, I published article warning about the seasonal effect on the EUR/USD.

Looks like it is playing out as expected:

One of the new chapters in my book, Day Trading and Swing Trading the Currency Market, Second Edition is on seasonality.

Technical analysis is based on the idea that price patterns repeat themselves and seasonality is rooted from this very same concept.

According to the following chart, over the past 10 years the EUR/USD depreciated in the month of January 7 times. If we expand the chart to include 1997, which I cover in the book, that would be 8 out of 11 times.

Of course, like all technical analysis, the pattern does not always repeat itself which is why we saw the EUR/USD rise in the month of January during 2003, 2006 and 2008.

For an explanation of why there is a strong case for seasonality in the currency market during month of January and for other examples of seasonality, treat yourself to a copy of second edition of Day Trading and Swing Trading the Currency Market

3 Comments

  1. How about the action of EURUSD in Dec. before the Jan. next year? I learned from BAC analyst they said in history, USD was weaken in Dec.. I think this is corelated to USDEUR strong in Jan..

    Reply
  2. Hi sorry, I posted my message on the wrong article;

    Anyway, there it is…

    “Hi Everyone,

    I’m currently playing on the EUR-USD and I was looking at the chart of this currency pair, I noticed that the EUR-USD (daily chart) may be forming an inverted-head-and-shoulder pattern. I wanted to have your point of view as I ‘m getting confused about why the dollar is going up givent that the US economy does not seem to be “that” strong in my opinion. Unemployment increasing, dollar being thrown away basically.

    I really look forward to reading your reply.”

    Jonathan.

    Reply
  3. There are 2 factors adding pressure on the Euro this week – the strong possibility of an interest rate cut by the ECB on Thursday and the creditwatch downgrade of Spain by Standard and Poor’s. Spain is on CreditWatch negative which means that they are at risk of losing their AAA rating. There is no question that the Eurozone economy is weakening and it will be just a matter of time before ECB monetary policy appropriately addresses.

    Reply

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