How to trade seasonal patterns in Forex, today: the EUR/NZD

The first ten days of April will probably be of special interest for EUR/NZD traders. While the currency pair went for a test and short stint below the 2018 yearly lows, it saw a significant pullback last Wednesday. This came in response to the RBNZ stating that the next shift in interests will most likely be downward, and the likelihood of yet another downwards drop in the coming days is very high from a seasonal perspective.

Seasonal Pattern in EUR/NZD

In fact, there is a historically significant probability of a falling EUR/NZD between April 1-10. In 15 out of the past 20 years, the EUR/NZD dropped an average of 235 pips, while losing only 106 pips on average during the remaining five years, with a maximum loss of 240 pips.

How to Trade The EUR/NZD Seasonal Pattern

But now the interesting question: how can we trade this?

We want to use the following plan:

1. After identifying the profitable seasonal window, enter the market on the opening price of the starting date on April 2 (23:00 CET), at 1.6516.

2. Identify the maximum loss within the seasonal period. Then, have a look at the Daily chart and the indicator ATR(14).
   
   If the maximum loss is above the ATR(14) reading, round it up to the next round number and use it as worst-case-stop.
   If the maximum loss is below the ATR(14) reading, use the ATR(14) as your stop-width (rounded up to the next round number).
   
   Since the ATR(14) in the EUR/NZD on a daily time frame is currently trading around 110 pips, we want to use the maximum loss of the window of 240 pips as our worst-case stop which we place at 1.6756.

3. Look at the average gain of the seasonal pattern. Place the take profit away this average gain from your entry point.
   
   The average gain of the seasonal pattern is 235 pips within this period. So, after entering the trade on the opening price of the 02nd of April at 1.6516, we subtract those 235 pips from it to get our Take Profit level at 1.6281.

4. If the trade is not stopped out as such, it does not reach its take profit within the seasonal period - end the trade market on the closing price of the identified period (in the chart below you can see a yellow smart line on the right for exactly that purpose).

Source: Admiral Markets MT5 with MT5-SE Add-on EUR/NZD Daily chart (between December 16, 2017 to March 29, 2019). Accessed: March 29, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the EUR/NZD fell by 7.3%, in 2015, it increased by 2.5%, in 2016, it fell by 5%, in 2017, it increased by 11.7%, 2018, it fell by 4.4%, meaning that after five years, it was up by 2.0%.

Check out Admiral Markets' most competitive conditions on the DAX30 CFD and start trading on the DAX30 CFD with a low 0.8 point spread offering during the main Xetra trading hours. To test Admiral Markets DAX offering in combination with the described strategy above register for a free demo account today and experience the live market risk free!

Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

1. This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
4. To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
7. Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
8. The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.

Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.