URICH2.com

You can earn cashback on every trade

no increased commission or spread, just the original trading cost offered by brokers

Get the best commission rebate rate with us

Understanding the seasonal tendencies in forex
Source: | Author:finance-102 | Date2023-02-21 | 236 Views | Share:
Seasonal tendencies in forex refer to the phenomenon where certain currency pairs exhibit a predictable pattern of behavior that occurs during a specific time of the year. These patterns can be related to economic, social, or geopolitical events that occur annually, affecting the supply and demand of a currency pair. These seasonal tendencies can be helpful for traders to understand the potential movements of these currency pairs during certain times of the year. However, as with all trading strategies, it is essential to incorporate other factors, such as technical and fundamental analysis, to make informed trading decisions.

Seasonal tendencies in forex refer to the phenomenon where certain currency pairs exhibit a predictable pattern of behavior that occurs during a specific time of the year. These patterns can be related to economic, social, or geopolitical events that occur annually, affecting the supply and demand of a currency pair. These seasonal tendencies can be helpful for traders to understand the potential movements of these currency pairs during certain times of the year. However, as with all trading strategies, it is essential to incorporate other factors, such as technical and fundamental analysis, to make informed trading decisions.


Here are some common seasonal tendencies in forex:


  • End of year: During the end of the year, companies and investors may repatriate their profits and investments back to the United States, which can increase the demand for US dollars. This is because they need US dollars to pay taxes, dividends, and make other payments related to their US-based operations. Additionally, some investors may also seek to hold US dollars as a safe haven asset during periods of global uncertainty. As a result, the demand for US dollars tends to increase during the end of the year, which can lead to an appreciation of the currency against other currencies.


  • Holiday season: During the holiday season, there tends to be an increase in international travel, and as a result, international travelers need to exchange their local currencies for US dollars to pay for their expenses in the United States, such as accommodation, food, and entertainment. This increased demand for US dollars can lead to an appreciation of the currency against other currencies. Additionally, during the holiday season, many retailers offer discounts and promotions, which can attract international shoppers to buy goods and services in the United States, further increasing the demand for US dollars.


  • Summer months: During the summer months, the demand for oil tends to increase due to higher consumption, leading to an increase in the value of the Canadian dollar, as Canada is a major oil producer. Similarly, the Australian dollar tends to be positively correlated with the price of gold, and therefore, the demand for gold jewelry during the festive season, especially in India and China, can have an impact on the value of the AUD.


  • Festive season: During the festive season, such as around Christmas and New Year, the demand for gold tends to increase as it is a popular gift and is often used in jewelry. Australia is one of the largest gold producers in the world, so an increase in the demand for gold can lead to an increase in the demand for Australian dollars. This is because buyers of gold need to exchange their local currencies for Australian dollars to purchase gold from Australian producers. Therefore, an increase in the demand for gold can increase the demand for Australian dollars, which can impact the value of the currency against other currencies.


  • End of fiscal year: The end of the Japanese fiscal year, which is in March, tends to see an increase in the value of the Japanese yen. This is because Japanese companies with overseas operations often repatriate their profits back to Japan at the end of the fiscal year. To do so, they need to convert their foreign currency earnings into Japanese yen, which increases the demand for yen and can lead to an appreciation of the currency against other currencies. Additionally, Japanese investors and companies may also engage in year-end adjustments to their investment portfolios, which can further increase the demand for yen. As a result, the end of the Japanese fiscal year can be a time of increased volatility and potential opportunities for forex traders.


  • Agricultural season: Brazil is one of the world's largest coffee producers, and the value of the Brazilian real is positively correlated with the price of coffee. This is because coffee exports are a significant source of revenue for the Brazilian economy, and an increase in coffee prices can lead to an increase in foreign exchange earnings from coffee exports, which can increase the demand for Brazilian real. The coffee harvest season in Brazil typically starts in May and lasts until August, and during this period, the supply of coffee increases, which can lead to lower coffee prices. Conversely, during the off-season, which is typically from November to February, the supply of coffee decreases, and coffee prices may increase, which can lead to an appreciation of the Brazilian real against other currencies. Therefore, traders may monitor coffee prices during the coffee harvest season as an indicator of potential forex market movements.


It's important to note that these seasonal tendencies are not guaranteed to occur every year and may be influenced by various factors. Therefore, traders should use other technical and fundamental analysis tools to make informed trading decisions.