Trading Perspective Update – The January Forex Effect March 1, 2011 In early January I issued a report on the January

Effect in the forex markets. Specifically, there is an extremely strong tendency for the U.S. Dollar to establish an annual top or bottom during the first five weeks of each year. In fact, the US$ has put in its annual top or bottom 67 percent of the years dating back to the early 1970s against a sampling of other forex units. By comparison, the random statistical odds for a high or low to occur in any given month is 16 percent. From a trading perspective, this seasonal pattern means that traders with a strong opinion need to put their skin in the game during January.
The January Forex Effect
EUR/USD 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 CHF/USD USD/JPY US$ Index No data No data No data No data No data No data No data No data No data No data No data January high No data No data January low No data No data No data No data No data No data

Given this seasonal tendency, let’s look at some forex pairs as of today (Mar. 1, 2011). There is a 67percent chance that the highs or lows for the year are already in place. This represents statistical

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odds, not a guarantee for profits. This does NOT mean traders should chase the current trends. It does mean that the burden of proof for the remainder of the year is on the US$.

plb ###

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