Using Seasonal Trends to Predict Currency Movements: An Unconventional Guide

What are Seasonal Trends in Currency?

Currencies move up and down throughout the year for various reasons - global events, economic policies or natural disasters.

But there are also times of the year when certain currencies behave in a predictable way. We call this a “seasonal trend.”

For example if people are traveling more in summer there could be more demand for a currency and it will be stronger.

On the other hand some currencies, like XAUUSD Justmarkets, might lose value during low business activity like winter holidays.

Seasonal Patterns in Currency Movements

Now let’s look at some common seasonal trends in currency and why they happen.

Summer Travel Season (June-August)

During summer people tend to travel more especially from North America and Europe.

This creates a high demand for currencies in tourist destinations, like the Euro (EUR) or Japanese Yen (JPY). As a result these currencies may rise.

Year-End Holidays (December)

In December people and businesses prepare for the holidays so there’s a slowdown in major economic activities.

Some currencies may weaken while others may strengthen as companies close out their books and pay out bonuses.

Tax Season (March-April in the U.S.)

Tax season is another time when currencies move in a predictable way.

The U.S. dollar (USD) may move as Americans pay taxes and get refunds which can create a temporary spike or dip in currency value.

These are not set in stone but are generally observed over many years.

How to Use Seasonal Trends for Currency Predictions

Now that you know about some seasonal patterns let’s get into how you can use them.

1. Check the Calendar

Certain times of the year currencies move in a predictable way. Knowing when these periods are can give you an edge.

For example if you know tax season makes the U.S. dollar dip you might buy foreign currency in early April when it’s cheaper.

2. Combine with Other Factors

Seasonal trends aren’t the only thing that affects currencies. Political events, natural disasters and economic reports can also cause sudden changes.

By combining seasonal knowledge with these events you’ll make better predictions.

3. Test on Paper First

Before you start trading, practice “paper trading” (making pretend trades on paper without spending a dime).

So you can test if your seasonal predictions work without losing any of your money.

Seasonal Trends and Currency Movement Comparison Table

Here’s a comparison of some common seasonal trends and their typical effects on major currencies:

This table can help you get a quick view of when certain currencies might be stronger or weaker.

Real-Life Example: Summer Travel Boost

You’re planning a trip to Europe in summer and need Euros.

You know summer travel increases demand for Euros so you buy them in early spring before prices go up.

That way you get the currency before it becomes more expensive in peak travel season.

Or maybe you are into the foreign exchange market.

If you know during harvest season, due to higher exportation, Australian Dollar appreciates, you can buy AUD before that period then sell when price peaks.

Conclusion

By using seasonal trend to forecast currency movement, you are like having some cheat sheet in the market.

Though it may not be a full-proof strategy, knowing these patterns give them some sort of edge.

Just keep in mind to include this in other market variables and follow news events causing upsets.

And this is my personal opinion: Seasonal trends are a decent starting point, if one is a beginner in Forex trading.

They are relatively easy to understand and no technicalities are too complicated. However, you cannot rely solely upon them.

Always be current about news events worldwide and always be ready to alter your strategy. Easy predicting!