GBP / USD Seasonal Patterns – Use a Seasonal Strategy to Ensure Entry and Exit Points in Forex

We usually look at Forex charts in chronological order, day after day, week after week, and year after year. General charts describe the price of a currency (pair) over the years and can provide a lot of information for technologists to use. Yet there is another way to look at currency charts, and that is to look at them in seasonal fashion.

So what is Forex Seasonal Pattern or Forex Seasonal Chart? For us, seasonality is the tendency for a currency to move up or down at a certain point in the year.

Instead of looking at the currency data for the last 30 years in chronological order, what if you could take it every year (January to December) and put it on top of each other every year. All 30 years are then averaged and an initial value of 100 is set to provide a line that shows how the currency has worked for the last 30 years between January and December (below we will see the average of 5, 10 and 15 years). / USD will show a seasonal pattern where it is usually higher in certain months, or lower in others?

See pound futures below, but keep in mind that since pound futures are traded against the US dollar, we can use the pattern seen in the futures market to trade the GBP / USD seasonality pattern. Therefore, this information can be used in both futures and forex markets.

GBP / USD seasonal patterns – 5, 10 and 15 year seasonal

There are actually consistent GBP / USD seasonal patterns and we can see these patterns by looking at a seasonal chart of pound futures. These seasonal trends can be used to find the right time to trade GBP / USD Forex pairs (or pound futures).

The seasonal chart shows the trend of the pound over the last 5 years, 10 years and 15 years. Each average provides a different line, and it’s important to understand the seasons–This is an average, not a rule. Prices can deviate from the seasonal trend in any year and traders should not fight it. Yet we can find similarities between the three averages:

  • The pound usually forms a bottom in late March and then rises in late April.
  • From the beginning of May to mid-May is usually a bearish time.
  • A floor usually reconstitutes in mid-May and we see it rise further in early August.
  • Prices usually peak in early August and fall in early September.
  • After October our averages differ in not providing the same information as the short-term (5 years) long-term season averages (10 and 15 years) thus making seasonal trends less concise and less reliable at this time.
  • The average re-aligns to form a peak in early November and the price moves from mid-November to late. After that the average is again isolated.

Seasonality is not a tool to use on its own, but should be combined with price pattern analysis to determine entry and exit points. Yet the season gives us a window of time where we can look for trend reversals and feel more confident if we see a price pattern that points in the opposite direction during the seasonal windows given above.

It is important to keep in mind the overall trend of the market. Use seasonal low points to buy up trend. In the overall downward trend, use seasonal highs to get short or sell.