It's October and weather may be cooling in the Northern Hemisphere, but trading heats up.
It is impossible to predict exact events or statements, but history is a guide to help shape wisdom going forward. October is not a calm month in the market, it is a high trading volume month that could potentially bring along volatility. What has happened in the past and are there any leading indicators based on this information?
Looking back since 2001 should provide a wide range of trading environments from the Financial Crisis to the current lower volatility environment that exists presently. One of the more notable things in the market is that political risk has become more of a factor with the fate of a currency pair. Political divisions on an internal and external basis have played a role, but it is still within the framework of a lower volatility market.
The currency pairs examined are USD/JPY, EUR/USD, and EUR/GBP.
USD/JPY in October
USDJPY rose significantly in October 2008, which happened to be during the most uncertain times of the Financial Crisis. The peak to trough difference was very large during this time. What is notable is not anything regarding the ferocity of the peaks or troughs, but rather the last seven Octobers. In the last seven Octobers, the Japanese Yen fell against the United States Dollar.
Since 2007, September has seen USDJPY drop in eight out of eleven years. This means that regardless of what happens in September since 2011, USDJPY has had a mind of its own and rose despite it.
EUR/GBP in October
Before the Financial Crisis, EURGBP in October was a bearish play. After the Financial Crisis, it became a bullish play. Volatility was higher in 2015 and 2016, which made it them most volatile months of October during the 2010s.
Generally speaking, Septembers are more bullish since 2001 on average. Octobers also go in the opposite direction from September 58.82% of the time. From 2006-2015, eight of the ten Octobers went in the opposite direction as September. The previous two years had Octobers serve as a continuation of the directional activity in September, it was the first time this took place since 2004 and 2005 saw the same thing happen.
Octobers are a month for higher highs in EUR/GBP rather than lower lows. Expecting a push upwards? Historically, October is a good time to see it happen.
EUR/USD in October
In the past four years, EURUSD has been won over by the bears. In the wake of the 2008 uncertainty and panic, there have been two streaks in October. From 2009-13, October has meant that EURUSD rose. In 2014-17, EURUSD fell.
September has a been an oracle for October for EURUSD. As 76.47% of the time, October goes in the same direction as September. September has been more tempered as far as the percentage movement for the currency pair in the past three years than October.