​Trading forex seasonal patterns, today: the AUD/JPY

  • master
  • 24.10.2019
  • Comments Off on ​Trading forex seasonal patterns, today: the AUD/JPY

Today, we want to focus on a bullish seasonal pattern in the AUD/JPY.

What makes this seasonal pattern especially interesting is the fact that on October 31, the BoJ will deliver its monetary policy statement.

Here, especially the recent turbulences in Japanese bond markets where
10-year JGB yields spiked on October 2 after a poorly-received auction, a likely sign that traders are finally paying heed to Kuroda’s recent comments warning against excessive falls in super-long yields, and leaves us with expectations that the BoJ is to deliver a more dovish stance than currently expected.

That said, the seasonal bullish window in the AUD/JPY between the October 28 until November 5 which developed over the last 24 years, and puts the advantage in the currency pair on the long-side and delivers a potential trading setup.

Seasonal Pattern in AUD/JPY

The key parameter of this seasonal bullish pattern is as follows: between October 28 and November 5, the AUD/JPY saw an average gain of 123 pips for 18 of the past 24 years.

In the remaining six years, it dropped on average only 51 pips, while the maximum loss and maximum drawdown were 122 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, we buy the AUD/JPY on the closing price of the starting date on October 28 (22:59 CET).
  1. We 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).
  1. We Look at the average gain of the seasonal pattern, and place the take profit at this distance from your entry point.
  2. 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 November 05.

    Looking at current market data, since the ATR(14) in AUD/JPY on a daily time frame is currently trading around 70 pips, while the maximum loss of the window was 122 pips, our worst-case stop will be placed based on a maximum loss 125 pips away from our entry price.

    Meanwhile, the average gain of the seasonal pattern is 123 pips within this period. So, after entering the trade on the closing price of October 28, we would add 125 pips to get our take profit level.

Source: Admiral Markets MT5 with MT5-SE Add-on AUD/JPY Daily chart (between August 2, 2018, to October 18, 2019). Accessed: October 18, 2019, at 21:00 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%.

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