USDJPY and Yen Futures Seasonality– Best Times of Year to Buy and Sell
Learn the times of the year when the USDJPY and Yen FX futures tend to do well and poorly, based on historical tendency.
Typically, most of us look at charts in chronological order, where the price is shown day after day, week after week, and year after year. These typical chart types show the price path of a currency over the years and provide a lot of information traders use. Yet we can also look at charts in a seasonal fashion.
A seasonal chart shows the tendencies of an asset to move higher or lower, or peak and bottom, at certain times of the year.
Instead of looking at the last 15 years of currency data in chronological order, what if you took each one year period, January to December, and printed it on a transparent slide. Then, put each year on top of each other. Doing this would highlight any period of the year that tends to be strong or weak. Luckily, we don’t need to do that. We can just take an average of the last 15 or 20 years to show what tends to occur at different times of the year (also see Stock Market (S&P 500) Seasonal Trends).
Below we look at the seasonality of Yen FX futures which will also aid in trading the USDJPY forex pair. Yen futures show the movment of the JPYUSD, not the USDJPY. There is a difference. Whatever tendencies we find in the Yen futures (JPYUSD), it will be the exact opposite for the USDJPY.
Yen Seasonal Patterns
The Yen has seasonal tendencies, and we can see them by looking at the following seasonal chart of Yen futures, which are traded relative to the USD.
Yen Seasonal Chart – 15 and 40 Year
The chart shows the tendencies of the Yen over the last 15 and 40 years.
- Over the last 40 years, January to the end of February has been bearish for the Yen. More recently, over the last 15 years, the first half of January has been somewhat strong, but February is still weak.
- The first half of March tends to bullish for the Yen. But the last half is weak.
- From early April to early May there is an upward bias.
- May typically sees the Yen decline.
- The first half of June is often choppy, but has an upward bias by mid-June.
- July is a sideways period, but an upward bias typically kicks in by late July or early August.
- Early August through to mid-October is an upward period for the Yen.
- By mid- to late October the Yen is usually peaking and starting a decline into mid-December.
- There has been a slight upward bias in mid-December, but the rally is typically short-lived.
The chart below provides a more general guideline of which months tend to be good or poor for the JPY USD. 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 also only looks at the last 20 years, where the chart above looks at 40 years, which leads to some slight discrepancies.
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. This is the graph to use if looking at trading Yen futures or the JPYUSD.
While this chart is a more general version of the first chart, it essentially shows the same data, just in a different way.
On the USDJPY graph below, all the numbers have been reversed (there may be slight rounding errors). This is the graph to consider if trading the USDJPY currency pair.
Things To Be Aware of With USDJPY Seasonality
Don’t use seasonality on its own, rather, combine it with current price analysis to determine entry and exit points.
Seasonality gives us 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 provides above. 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. 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.
Cory Mitchell, CMT