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Beware of Seasonal Forex Reversals by: Ashraf Laidi
Posted: November 19, 2008 ET
Comments: 13
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Mamood,

Good point ! I am more certain that the role of seasonal reversal will be effective in favoring EUR, GBP, CAD against USD than weigh on JPY vs USD.

USDJPY seems unusually FROZEN at 95.00-95.80 (take a look at the 2-hour Williams % R and Bollinger Bands) because it is torn between improving markets (good for USDJPY) and geopol risk and continued econ weakness (bad for USDJPY).

You can use hedging in JPY trading, whereby go long EURJPY and short GBPY.

Ashraf

Ashraf, is your statement below still valid about reversal especially for USDJPY? Your comment on CNBC did not appear that way.

"A repeat of these trends could see reversals in EURUSD, GBPUSD and USDJPY towards $1.33, $1.62 and 100.00."

Thanks,
Mamood

Tracy,

As these seasonal reversals get underway, both gold and CAD go up, which means GOLD is likely to breach above the 100-day moving average of 832 and USDCAD drops towards 1.2120. This is especially the case that CAD is a commodity currency, thus, you could see Aussie, CAD and NZD rsie along with gold and oil. But gold remains my preferred commodity relative to oil, as we should see $1200 before Q3 2009.

Ashraf

Hello Ashraf,

Really like your site...you mentioned gold breaching the $810 resistance level my question is how does gold's ris interrelate to the seasonal FX reversal and the USD/CAD?

Thanks,

Tracy

Frank,

Normally, continued selling in US and world equities should continue to favor the yen as the best currency, followed by the dollar at the expense of EUR, AUD, NZD, GBP etcc. BUT BE CAREFUL about the catalyst to renewed selling in equities. if the catalyst is largely US-based, e.g. Citigroup, then that may be bad news for the dollar across the board, benefiting gold. This was seen in mid September when Lehman went bust and AIG was feared to go the same road. I wrote about this in my last article in the gold section.

Also, for those betting on prolonged risk aversion (falling equities, rising JPY and USD) must be warned due to the possibility of a year-end rally, which could emerge from news of a bailout package for US autos, Citigroup breaking up etcc.

Ashraf

Ashraf ,, what if we get another 20-30% sell off in the stock market because of a Citigroup bankruptcy or something .. Would the US $ and yen just keep raising or at some point in a stock market sell off would they start selling off with the stock market ? At what point would the US $ and Yen be to high under these cirumstances ?

Cheers

Frank

Bubbles,

In case you still have problems getting the book from Amazon, you can try Barnes&Noble. http://search.barnesandnoble.com/Currency-Trading-and-Intermarket-Analysis/Ashraf-Laidi/e/9780470226230

New,

Gold and dollar feed off each other. My medium and long term assessment for gold remains positive. Once stocks mount a rebound, dollar eases off and gold rallies, especially amid the first signs of economic stability in China, Canada and Australia.

Ashraf,thank you for this insightful article.
I found gold price is hard to analyze from a fundamental perspective,is the primary determinants are us dollar trend and inflation perspect?what is your view about the long term and medie term trend of gold?

Hamish, if this reversal takes place, USDCHF may have to pull back towards 1.15. get set for a nasty European open. And watch the support of those triangles in the weekly JPY pairs.

Ashraf