The US dollar is a global currency comprising over 85% of all currency transactions. So traders choose between being a pro-dollar or anti-dollar. Most of them predict the future trend by employing either fundamental or technical analysis, or both. But what they fail to realize is that timing plays a vital role in the US dollar’s behavior against several currencies.

Speaking of timing, a trader may notice patterns when looking solely at price. That is called seasonality, a predictable change which repeats year over year at the same time period. Although historical patterns may not repeat in future, there is some prevailing trend. So what are the four seasonal trends on the forex market?

January – negative for EUR/USD

A firm seasonality is eminent in the behavior of the US dollar against the euro in January. Why does the US dollar rally in January? Because many firms return their money to their home countries at the end of the year and then send it back at the beginning of the year to venture on new investment. Every year, companies go back to square one as far as profits and losses go. Most investment money ends up in the US market as it is one of the world’s most liquid ones.

May – very negative for USD/CAD

May represents the strongest case of seasonality for USD/CAD since Canada is one of the biggest oil producers worldwide and corporations within the country are sensitive to oil prices. In the March-April period, oil prices tend to increase, which could bolster the profitability of Canadian companies. As a result, economic data enjoys seasonal improvements.

July – positive for USD/JPY

There is no precise reason as to why this currency pair thrives in July. It may be attributed to the end of Japan’s first quarter or the start of the United States’ second half of the year. Whichever, this is a very sturdy season for the USD/JPY. As a rule, traders open short-term buy positions of a smaller size during this month.

August – often erases July gains of USD/JPY

August is another strong case of seasonality offsetting the gains of USD/JPY made in July. August tends to be the most advantageous month for the Japanese yen, as seen at other yen crosses. The yen’s major counterparts such as the euro, the US dollar, and the British pound decline during this time.

There are four seasonalities on the forex market. Being familiar with these tendencies can help currency traders find the probabilities of each trade. It can also make traders support or evade a trade idea.