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