Forex

Calendar Yen Trading Patterns

As is the case with other markets such as commodities, forex demonstrates patterns of ?seasonal? behavior which can be traded. These calendar patterns vary from pair to pair due to the dynamics of the currencies involved. In this article, the Yen (JPY) is the focal point, though there are similar patterns of action in other ares of the foreign exchange market.

Monthly Patterns

If one first takes a look at the market from a monthly perspective, it can be seen that USD/JPY and the JPY-based crosses have months in which they demonstrate clear tendencies. The figures below outline this. The graphs takesa month-by-month look at USD/JPY since 1999 (seven years total), which encapsulates the time since the launch of the Euro, an important watershed moment in the forex market. Each bar indicates the net up month to down month reading. For example, a reading of +5 indicates that there were 6 up years for that month as opposed to just one down year, out of the seven


caption: Figure 1. USD/JPY Monthly Trading Patterns  Source: Opportunities in Forex Calendar Trading Patterns – Anduril Analytics

A quick look at the chart indicates that there are a few months in which USD/JPY has been strongly biased in one direction or the other. The prime example is August, the month in which the market has been down every year since 1999. During that time, USD/JPY fell for the month at least 137 pips each time around, with most of the declines coming in at better than 200 pips. The average has been 320 pips, which translates to a move of 2.80%.

January and July also jump out. They have both seen USD/JPY rise in six of the last seven years. The results for July, however, are fairly unexciting. The market?s average rise has only bee about 35 pips, whereas the average increase for January has been nearly 200 pips.

In the case of EUR/JPY, as one might expect, August is a consistent down month, though there has been one up month since 1999. The average decline has been over 300 pips. November has been equally biased to the upside in terms of the 6:1 ratio, but the average rise is only 77 pips. The really interesting month, however, is December. The market rose every year from 2000 to 2004. Even though it fell in 2005, the cross has averaged a 350+ pip increase each year.


caption: Figure 2. EUR/JPY Monthly Trading Patterns  Source: Opportunities in Forex Calendar Trading Patterns – Anduril Analytics

As with EUR/JPY, GBP/JPY shows very strong directional tendencies in August and December with an average drop of over 600 pips in August and an average gain of 435 pips to end the year. Sterling has an interesting tendency of its own in September, which is reflected in the cross with JPY for that month. Specifically, GBP/JPY has risen six out of seven years at an average rate of nearly 280 pips.


caption: Figure 1. GBP/JPY Monthly Trading Patterns  Source: Opportunities in Forex Calendar Trading Patterns – Anduril Analytics

Weekday Patterns

Shifting from months down to days, we can see other patterns appear.  Some of them are most obviously related to the monthly ones note previously. Others are less so.  Again, the focus of the study is trading during the 1999 to 2005 span.

If one were to look strictly at the daily market movements, there would be very little to suggest that USD/JPY or any of the JPY-based crosses is anything other than a 50/50 directional prospect for any given weekday.  Things get much more interesting when the filter of the month is applied as well.  Take a look at the table below to see what kind of patterns show up.

Weekday Month Up:Down Up/Down % Avg. Pips Avg. %
Tuesday August 9:22 Down 71% -27 -0.23%
Thursday August 11:20 Down 65% -13 -0.10%
Friday August 11:20 Down 65% -12 -0.10%
Monday January 11:20 Down 62% -30 -0.26%
Tuesday May 12:18 Down 60% -22 -0.18%
           
Wednesday November 20:9 Up 69% 15 0.15%
Friday September 19:10 Up 65% 26 0.24%
Thursday January 19:10 Up 65% 20 0.18%
Wednesday February 18:10 Up 64% 33 0.30%
Tuesday December 18:11 Up 62% 15 0.13%

Given that August has a strong downward tendency, it is no surprise to see that USD/JPY has three strong downwardly biased weekdays in that month.  January, however, tends to be an up month for the market, but Monday’s that month have a definite negative leaning.  On the upside, there are examples of solid weekday biases scattered all over the place.

These sorts of weekday biases in certain months also can be seen in the crosses, in some cases in even stronger fashion.

Pair Weekday Month Up:Down Up/Down % Avg. Pips Avg. %
GBP/JPY Tuesday August 8:24 Down 75% -52 -0.28%
EUR/JPY Monday January 8:21 Down 72% -33 -0.30%
GBP/JPY Friday August 9:22 Down 71% -31 -0.17%
CHF/JPY Monday August 9:21 Down 70% -15 -0.18%
AUD/JPY Monday January 9:20 Down 69% -16 -0.22%
             
EUR/JPY Wednesday November 22:7 Up 76% 34 0.29%
GBP/JPY Thursday October 22:8 Up 73% 31 0.17%
AUD/JPY Friday September 22:9 Up 71% 11 0.16%
EUR/JPY Friday June 21:9 Up 70% 31 0.29%
GBP/JPY Wednesday November 21:9 Up 70% 27 0.15%

Application to Trading

Trading based on seasonal or calendar patterns can be tricky.  One can never quite be sure when a pattern is going to fail, or change all together.  As a result, to blindly trade them with no concern as to risk would be quite foolish.  Yes, some of these patterns are very strong.  One who sold USD/JPY at the start of each August and closed out the trade at the end of the month would have made over 2200 pips in the last seven years.  That’s a pretty good take, but there are drawdowns.  Sometimes they can be quite large.

Probably the best use of the type of data presented here is in its application to bias one’s trading.  For example, a day trader could make use of the fact that GBP/JPY has risen 75% of the time on Tuesday’s in August to favor long positions on those days.  A swing trader could look to sell strength or go with downside breaks in USD/JPY during August with a high degree of comfort that the percentages are in one’s favor.  And of course a mechanical trader can incorporate the calendar information in to systems.

The point is that data such as the calendar patterns outlined here should be considered another tool at one’s disposal.  It is potentially quite valuable, but certainly not an end in and of itself.

John Forman is a Professional Forex Analyst and is currently working for Thomson Reuters and was previously Managing Analyst and Chief Trader for Anduril. He 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. 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 and he was also a former Content Editor for Trade2Win
John is the author of the book The Essentials of Trading: From the Basics to Building a Winning Strategy (Wiley, April 2006). He has spoken on trading and market related topics to numerous student groups and been a guest lecturer on several occasions. In cooperation with a professor, he helped design and present a university level trading course.

John Forman is a Professional Forex Analyst and is currently working for Thomson Reuters and was previously Managing Analyst and Chief Trader for Andu...

Rhody Trader

Senior member
2,620 264
In this article author Shawn-Elyse Tulac describes how the Japanese Yen and its crosses have tradable calendar patterns of behavior akin to the seasonal patterns demonstrated by other markets like commodities.
 

mahras

Newbie
1 0
She only uses data from 1999-2005. That is a ridiculously insufficient amount of data to prove her hypothesis. That is 6 datapoints per month.

I suggest she look at how researchers proved the January effect and WHY it actually occured (tax selling in Dec). Then she analyze JPY data for a minimum of 30 years or at least 40-50 years before presenting proof of her hypothesis. After that she needs to figure out why something occurs instead of just stating that its occuring.

Funny thing is people spend money on this.
 

Rhody Trader

Senior member
2,620 264
mahras said:
She only uses data from 1999-2005. That is a ridiculously insufficient amount of data to prove her hypothesis. That is 6 datapoints per month..
It's seven data points for the monthly stuff, and 30+ for the weekday data, but that's of little consequence. As the article indicates, the reason for starting with 1999 is that's when the Euro was launched. The idea is that the introduction of the Euro changed the forex landscape by creating a new high volume currency and shifting the balance of power, so to speak.

It would certainly be interesting to know the causes for these patterns, but is that required for trading? Maybe, if you're a fundamental trader. Technicians would argue that there is an indication of a trend in the price data. Most people trade trends, one way or another.
 

billy1000000

Newbie
2 0
One should be aware that no one article here is a scientific investigation. The author has noticed an interesting irregularity and it's up to you to decide what to do with JPY next August.
 

Rhody Trader

Senior member
2,620 264
GammaJammer said:
Imho the currency markets are demonstrably non-random. I'm not going to get into a debate about whether or not this is the case as I've been down that road often enough before and life's too short. If anyone believes otehrwise then that's entirely up to them. But when, in the past I have stated my case, first currency up to the witness box is usually the Yen ;-)
I concur 100%. I've always thought the Yen was a very "trendy" currency. Trend trading systems do have a tendency to have better than average performance in USD/JPY.

Now Sterling is another story all together. :D
 

author_trader

Newbie
5 0
Whether you nitpick the conclusions or not, the article offers a template for further research. No one should follow this lady’s work without confirming it on their own. And, because she presented stats (sorely missing in most articles) the research-challenged trader has a roadmap as to what needs to be done. Having read the manipulated ratings that some of the BS articles get, I suggest that many of the readership can learn from this author.
 

Jennjam

Newbie
5 0
I agree with author trader.....compare this solid article with one written by a guy named Manby earlier this year....spot the difference? hehe just where do people get their information???? Perhaps from the secret service, SAS, Martians....maybe Socrates can help ;-)
 

The Baptist

Established member
715 45
Useful filter for possible trades, well done.
 

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