Hello Friends, I hope you all are doing ok. This week I am adding a new tool to our arsenal. It’s the seasonality charts. This will help us visualize what happened in the past in moments similar to the one we are living in. Let’s go!
I was looking at some pairs and what happened to then on previous time coronavirus tried to overtake us. I did some interesting findings that I will now share with you.
USDJPY BEARISH BIAS
Speculators are adding again to the short side and this is very similar to what happened in 2002, to be honest, the similarity of both charts are almost scary.
First, we can see how specs are back again to the short side.
Cumulative returns – Seasonality Chart 2002 vs 2020
Cumulative returns – Seasonality Chart 2003 vs 2002 vs 2020
If the story is repeating itself in the worst-case scenario this can push USDJPY below 100 near to 95.04 and in the more optimistic to 104.750. For what big speculators are doing looks like more people believe this. USDJPY has historical volatility for April to oscillate 404.15 pips from High to Low, so 104.750 is on the cards for this month.
I am taking a bearish view on USDJPY and will start to sell spikes and demand breakouts.
Trading Plan
I am taking a small position here and will compound as markets go in my favor.
EURUSD – BULLISH BIAS
After making a bumpy and long journey to the short side, speculators are net-long again on EURUSD. If we look at how aggressive specs were on changing side its almost if they “know something” that we don’t. From -123765 to +78102 in less than two months! That’s a huge, fast and aggressive change.
Looking at seasonality charts its easy to see EURUSD near 1.19 again. So I am taking a bullish bias. Buying dips and supply zones breakout!
EURUSD historical volatility for April is a movement of 458 pips and from month open to month close +1.01%. 1.11 is on the cards for this month!
Seasonality 2002 VS 2003 VS 2020
trading plan
I am participating in the markets. I took a small position today and will look to compound as the market goes in my favor. 1.112 is the first target. This will change, as the monthly median price will too.
CHFJPY – BULLISH BIAS
This is another pair that seasonality can help us a lot. To help our view we have a cot triggered signal this week. Uptrend resumption, you all know how powerful this event is. However, as pointed by Nordea on their FX Weekly Report we may see another sell-off and this combined with lower USD real rates, can push CHFJPY lower. Well, but there is a trend happening around the world, protests to end the lockdown. So these risk-off events will be seen as an opportunity to buy and not to panic again.
I have a bullish bias, but I will try to buy it lower at the bottom band of expected volatility for this month.
![CHFJPY VOL D]()
![CHFJPY VOL D]()
Seasonality Chart 2003 vs 2020
Trading Plan
I am making use of historical volatility to place my orders. For now, I only have a long limit order on it.
That’s it my friends! I hope this can add value to you. The seasonality chart and Volatility tools are available for members of the chatroom. The volatility tool display for us what to expect for the month and the day. This makes easy to spot exaggerated moves that are ready to return to the mean.
Friends, in the chatroom I run there is no space for bullshit… “I think this… I think that… Because someone told this…” Its the tactical use of quantitative tools that it’s in the arsenal and others that are still in development. Join me here.
Have a great week. If you have doubts or suggestions send me a message and friends, if this adds values to you please share it on your social network.
Best regards.
Leo Hermoso
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