Here’s how I use this bullish pattern
TradingMarkets is pleased to
introduce our latest contributor, John Forman. John is principal of Anduril
Analytics, a financial markets research and education group. He is also the
author of a forthcoming book,
The Essentials of Trading: From the Basics to Building a Winning Strategy.
I hope you enjoy reading John’s weekly column.
Ashton Dorkins
Editor-in-Chief.
January Forex Trading Patterns Suggest USD gains
The start of a new year gets a lot of traders’ juices flowing, and that
translates in to price action. Over the last several years, the Dollar has
been a beneficiary of that enthusiasm. Since the introduction of the Euro
in 1999, January has been a very strong month for the Greenback, as can be seen
in the graph below. It outlines the net number of positive years for a
number of currency pairs (up months minus down months), such that a pair which
rose 5 times and fell twice would show as +3, as in the case of AUD/JPY.Â
This is based on the open to close for the month.
USD/JPY
In six of the last seven years, USD/JPY has risen the first month of the year.Â
In fact, it’s only declined for the month twice in the last decade. On
average, it’s been up nearly 200 pips since 1999, or about 1.75%. In terms
of intra-month moves, it’s even more exciting. The USD has been at least
2.50 JPY higher at some point in January in eight of the last ten years.
EUR/USD
As in the case of the JPY, the EUR has fallen six out of the seven Januarys
since it was launched in 1999. On average, the drop has been about 200
pips as well, which is about 1.80%. Four times the decline in EUR/USD has
been in excess of 300 pips, over 3%, and every year the market has fallen at
least 150 pips from its opening level at some point during the month.
USD/CHF
The CHF has tended to take the biggest beating against the USD to start the
year, falling on average about 2.25%, or over 300 pips. As in the case of
USD/JPY and EUR/USD, its been six out of seven years of Dollar gains. In
fact, USD/CHF has only fallen for the month of January once in the last decade. Most of the gains
for the USD have been 3%-5%. One was even more than 6%, a whopping 800
pips!
GBP/USD & AUD/USD
Interestingly, the general tendency for a strong USD in January does not extend
to GBP/USD or AUD/USD. Neither pair has been predominantly lower on the
month. In fact, both are pretty neutral, and USD/CAD has been downright
boring!
Trading these tendencies can be as easy has buying the USD and sitting on it
until month-end. For the active trader, however, this probably doesn’t do
the trick. Also, there’s always the risk of a negative outcome, and even
if not, sizeable draw downs are not out of the question. My personal
approach to trading these patterns is to use them as a bias in my shorter-term
trading. I then look for market activity in the direction of the bias,
such as breakouts, for low-risk entry points with loads of potential.
Note: Graph and statistics courtesy of Anduril Analytics as presented in
Opportunities in Forex Calendar Trading Patterns.
John
Forman is a principal of Anduril
Analytics, a financial markets research and trading education group. As
Anduril’s Managing Analyst and Chief Trader, he directs the firm’s trading and
research operations. He also manages publication of the
Anduril Trading Report,
which details all the market analysis and real-money trading decisions
made by Anduril for its active portfolio in a manner which serves to teach
analytics methods and trade decision-making while also providing trading ideas.
John
is a near 20-year veteran of trading and investing
across a wide array of markets and instruments, and a former professional
analyst with experience covering forex, fixed income, equities, and
commodities. He is author of the forthcoming book,
The Essentials of Trading: From the Basics to Building a Winning Strategy
(Wiley, April 2006). His
analysis and market comments have been found in the financial news media across
the world and he has published dozens of articles on trading methodology and
analysis technique. He is also Content Editor for the
Trade2Win active trader community
website, which has over 40,000 registered members.
John may be
reached at analyst@andurilonline.com.