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Forex Seasonality: Canadian Dollar and Japanese Yen May Decline in July
Wednesday July 1, 08:19 PM
Forex trading market seasonality is an effect widely studied as a primary mover of major currency pairs, as long-term studies suggest that certain seasonal patterns may be able to predict forex price moves. The month of July has produced some interesting results in the Japanese Yen and Canadian dollar. Both the USDCAD and the USDJPY have rallied in July through 9 of the past 11 years. Read below for further information on the JPY, CAD, and forex seasonality studies in other major currencies.
Forex Seasonality in the Canadian Dollar
The Canadian dollar has shown remarkable consistency through the month of July, falling in 9 of the past 11 years of trading. One would think that such strong seasonality would have something to do with oil or commodity prices, but similar studies on Crude Oil prices and the Reuters CRB index are far less conclusive. As it stands, the USDCAD has started the month already 100+ pips below its June close. Previous trends suggest we should watch for potential USDCAD reversal through the coming month’s trade.
Forex Seasonality in the Japanese Yen
The Japanese Yen has shown similar seasonal consistency through the month of July, rallying in 9 of the past 11 years. Due to outsized losses during the financial crises of 1999 and 2007, its average July gain is rather small. Yet it should be interesting to watch whether seasonal trends can once again push the Japanese Yen lower through the coming month of trading.
Forex Seasonality in the New Zealand Dollar
The New Zealand dollar has fallen in July through 8 of the past 11 years, giving evidence that it could once again decline through the coming month of trade. The justifications for said seasonality are admittedly unclear, but it is interesting to note that the NZDUSD’s July losses have been fairly substantial. Exceptions have come in 2001 and 2006, when the NZDUSD gained a little over 50 and 100 pips, respectively.
Forex Seasonality in the Australian Dollar
The Australian Dollar’s seasonal trends are unsurprisingly similar to that of its New Zealand counterpart, with the AUDUSD dropping in July through 8 of the past 11 years. Again we see relatively few clues on the fundamental cause for seasonal trends. Yet it will be interesting to watch whether the Australian Dollar will once again decline through one of the least liquid trading months of the year.
Forex Seasonality in the Euro/US Dollar
The Euro has shown a fairly inconsistent seasonal trend through the month of July, falling in 6 of the past 10 years of trading. We do not expect any particularly noteworthy seasonal influences on the EURUSD through the month ahead.
Forex Seasonality in the British Pound
The British Pound has shown similarly limited seasonal trends through the month of July. In fact, the average monthly change in the GBPUSD through July is almost exactly zero pips. Suffice it to say, we do not expect any real seasonal pressures on the GBPUSD pair.
Forex Seasonality in the Swiss Franc
The Swiss Franc has rallied in July for 7 of the past 11 years, but its average monthly change through that stretch is actually negative. We do not expect seasonal pressures to affect the pair through the coming month of trade.
Written by David Rodríguez, Quantitative Analyst for DailyFX.com
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Source:David Rodriguez, Quantitative Strategist strategist@dailyfx.
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