Learn the times of the year when the AUDUSD currency pair and Australian dollar futures tend to do well and poorly, based on historical tendency.
Normally we view charts in chronological order, day after day and year after year. This chart type shows the price path of a currency over time and provides a lot of information for technicians to use.
There’s another way to view currency charts, and that’s to look at them in terms of seasonality.
A seasonal chart shows the tendencies of an asset to move higher or lower, or peak and bottom, at certain times of the year. We do this by only looking at how the asset performs from January to December over a number of years. All the data is plotted between January and December, and then an average is taken to highlight the times when the asset tends to rise or fall with some regularity during the year (also see S&P 500 Seasonal Trends).
Below we look at the patterns of Australian dollar FX futures which will also aid in trading the AUDUSD forex pair.
AUDUSD Seasonal Patterns
The Australian dollar has seasonal tendencies, and we can see them by looking at the following seasonal chart of Aussie dollar futures, which are traded relative to the USD.
The chart shows how the AUD has acted throughout the year, over the last 15 and 32 years. Since the statistics are being calculated over different lengths of time, there are some discrepancies. The longer-term calculation (32) contains more data, while the shorter-term statistic (15) shows what has been happening more recently.
- January is a choppy month. No strong directional bias.
- February is bullish for the AUD.
- The two weeks of March have been bearish for the AUD, but this is quickly followed by another strong period between early March and the start of May.
- May is a poor month for the AUD.
- In June the AUD tends to rebound a bit after the May decline, there is no substantial direction bias until early July when the AUD tends to be strong again into late July.
- The AUD typically declines through August.
- The first half of September is bullish, the last half bearish.
- October is bullish, although over the last 15 years weakness has started to kick in before the end of the month.
- The first half of November is bearish, with a bit of an uptick in the last half of the month
- December is also a split month, with weakness in the first half and strength in the second half.
The chart below provides a more general guideline of the seasonal tendencies of the AUDUSD. As noted above, some pretty big moves start early, in the middle, or late in a month, so the prior chart is more detailed in that regard.
The chart below provides other information. The number on the top of the column shows how often (%) the price moved higher in that month over the last 20 years. The number at the bottom of the column gives the average percentage rise or decline.
While this chart is a more general version of the chart above, it essentially shows the same data, just in a different way.
Things To Be Aware of With AUDUSD Seasonality
Seasonality is not a tool to be used on its own, but rather should be combined with current price analysis to determine entry and exit points.
Seasonality provides us with windows of time where we can watch for trend reversals and feel more confident if we see a corresponding price pattern during the seasonal windows discussed above. For example, we may also feel more confident riding a trend that aligns with the seasonal patterns.
It is important to keep the overall trend of the current market in mind. In uptrends use seasonal low points to buy. In overall downtrends use seasonal high points to get short or to sell….assuming there is a valid trade signal. Don’t fight a current trend just because the seasonal pattern says the price should be going the other way. As can be seen from the second chart, most months are only slightly favored to move one way or the other.
No matter what the seasonal tendency is, always manage risk. In any given year the price can deviate from the tendency, resulting in large losses if you trust the historical data blindly. Use stop loss orders and control position size to manage risk.
Using seasonality is not a requirement for successful trading, it is simply a tool that swing traders may opt to use if they feel it helps them.
By Cory Mitchell, CMT
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