The beginning of the month warrants a review of the seasonal patterns that have influenced forex markets over the past several years. For January, as we did for all months in 2016, we expanded our focus on the period of 1997 to 2016 in recognition of the evolving relationship between economic data, central banks, and financial markets.
The longer observation period captures several crisis events/periods that traders may find analogous to events unfolding today, even as the ramifications from Brexit are unclear: the Asian crisis; the US tech bubble; the US housing bubble; the global commodity bubble; and previous rate hiking and rate cutting cycles, from the major central banks, during times normal (pre-2008) or extraordinary (post-2008). By increasing the sample size to 20 years, we believe the statistical stability of the estimates will have increased relative to utilizing a shorter time-frame/smaller sample size.
Forex Seasonality in Euro (via EURUSD)
January is a bearish month for EUR/USD, from a seasonality perspective, due to its consistent performance metrics. The pair has depreciated 70% of the time in January over the past 20-years, and its average performance during this time frame was -194-pips per month. EUR/USD has lost ground in three straight years.
Forex Seasonality in British Pound (via GBPUSD)
January is a bearish month for GBP/USD, from a seasonality perspective, due to its consistent performance metrics. The pair has depreciated 65% of the time in January over the past 20-years, and its average performance during this time frame was -112-pips per month. GBP/USD has lost ground in four straight years.
Forex Seasonality in Japanese Yen (via USDJPY)
January is a slightly bullish month for USD/JPY, from a seasonality perspective. The pair has rallied 55% of the time in January over the past 20-years, yet its average performance during this time frame was just +42-pips per month. USD/JPY gained ground in January 2015 after falling in each of the prior two Januarys.
