All Trade Ideas and trading scenarios found on FX360.com are hypothetical. FX360.com has not placed these Ideas in a live trading environment. Forex Trading involves high risks, with the potential for substantial losses that exceed your initial deposit and is not suitable for all persons. Past performance is not necessarily indicative of futures results.

Forex: Unique Trading Behaviors in September

Last updated 9/6/2010 9:52 AM ET (GMT -5) 1 Comments

• Share this:

Kathy Lien

Director of Currency Research, GFT

. In the beginning of August, we pointed out that USD/JPY has a strong tendency to weaken during the month. According to our calculation, the currency pair declined in value in August ten out of the past twelve years and 2010 was no different. 

September brings us only one case of seasonality in USD/CHF where the currency pair declined in value 8 out of the last 12 years. This month is usually a brutal month for U.S. stocks which may help to explain why the dollar has repeatedly declined against the Franc. Given the challenges that lie ahead for the U.S. economy in the months ahead, we would not be surprised if the pattern is repeated once again. 

Yet a more interesting characteristic about the month of September is its ability to forecast how the market behaves in the fourth quarter.  In the following tables, we can see that the EUR/USD has traded the same way in Q4 as it did in the month of September 63 percent of the time. For USD/JPY, the pattern occurred 72 percent of the time. Given that the pattern was not repeated in 2009, it is clear that seasonality does not equate to certainty, but it does indicate the potential predictability of September price action. We never advise following seasonal patterns blindly but rather encourage our traders to utilize this information as a part of their analysis. For example, if USD/JPY strengthens significantly in the month of September and there are opportunities to buy in October, the previous pattern mentioned may add to reasoning behind the trade. Alternatively if there are opportunities to sell USD/JPY between the months of October and December, traders should spend a bit more time considering whether fundamentals and / or technicals are strong enough to support the trade. If so, then the patterns can be discounted because given the right scenarios, they have broken in the past. 

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Forex Trading and FX360 .com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. Global Forex Trading and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

• Share this:

Comments (1)

FXDragon

September 06, 2010 at 04:51 PM ET

I think this September will be green in usdchf because of risk aversion.

Add Your Comment

Please login to post a comment or sign up for an FX360® account.

Loading...

About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.