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How to trade seasonal patterns in forex, today: the AUD/JPY

July 17, 2019 10:00

Today, we want to look at a very interesting currency pair: the AUD/JPY. This comes especially in times of higher volatility and the tense situation around the trade war between the US and China.

In general, the situation does not look very promising for the Australian Dollar: at the beginning of this month the central bank of Australia, the RBA, cut interest rates to a record low of 1%, with a chance of going even lower in the months to come resulting out of trade war fears, low inflation and subdued wages growth.

Even though, that this is not a very promising midterm outlook for the Aussie, AUD/JPY is facing a very interesting bullish seasonal pattern which developed over the last 24 years during the time span between July 29 and August 27.

Seasonal Pattern in AUD/JPY

The key parameter of this seasonal bullish pattern look as follows: between July 29 and August 27, AUD/JPY saw an average gain of 309 pips for 18 of the past 24 years.

In the remaining six years, it dropped on average only 133.5 pips, while the maximum loss and maximum drawdown were 233 pips.

Trade the Seasonal Pattern: AUD/JPY

And now the key question: how could we trade this?

Here's the plan:

  1. After identifying the profitable seasonal window, buy AUD/JPY on the closing price of the starting date on July 29 (21:59 CET).
  2. Identify the maximum loss within the seasonal period. Then, have a look at the daily chart and the ATR(14) indicator.

    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).

  3. Look at the average gain of the seasonal pattern, and place the take profit at this distance from your entry point.
  4. If the trade is not stopped out or it does not reach its take profit within the seasonal period, end the trade market on the closing price on August 27.

Looking at current market data, since the ATR(14) in AUD/JPY on a daily time frame is currently trading around 50 pips, while the maximum loss of the window was 233 pips, our worst-case stop will be placed based on maximum loss 240 pips away from our entry price.

Meanwhile, the average gain of the seasonal pattern is 309 pips within this period. So, after entering the trade on the closing price of July 29, we would add 310 pips ticks to get our take profit level.

Source: Admiral Markets MT5 with MT5-SE Add-on AUD/JPY Daily chart (between April 27, 2018 to July 12, 2019). Accessed: July 12, 2019, at 07:00 GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the AUD/JPY increased by 4.1%, in 2015, it decreased by 10.4%, in 2016, it decreased by 3.5%, in 2017, it increased by 4.0%, in 2018, it decreased by 12.1%, meaning that after five years, it was down by 17.7%.

Check out Admiral Markets' most competitive conditions on the AUD/JPY and start trading from as low as 0 pips. To test Admiral Markets AUDJPY offering in combination with the described strategy above register for a free demo account today and experience the live market risk free!

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  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.
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