FX Seasonality: What Still Works—and What Doesn’t in 2025

Identifying pockets of price-insensitive buying and selling is one of the best sources of edge for the trader.

And this happens more often than you might think, for all sorts of reasons.

For example, ETFs and other funds that operate under a mandate must do certain trades to bring their exposures into line with their requirements.

In addition, sometimes, people and businesses do more buying and selling at certain times simply due to operational requirements.

In fact, this idea drives one of the most persistent seasonal patterns in FX: the “home vs away” effect. In a nutshell, European companies doing business internationally will sell euros to buy dollars during their business day, creating marginal excess demand for dollars. When the Americans wake up, the opposite happens.

This isn’t magic. It’s just good old-fashioned supply and demand at work.

And here’s the thing – this pattern still works today. It doesn’t play out like clockwork – far from it. It’s a noisy effect that happens at the margins. It’s small enough to make it difficult for independent traders to harness. But if you go looking in the data, you’ll notice that it’s still there, on average.

Not all seasonal patterns are created equal. Some are rock-solid and backed by real economic behaviors. Others are statistical ghosts – the result of randomness.

So how do you tell the difference? That’s what we’re exploring today.

The Persistence of FX Seasonality

First things first – what even is FX seasonality?

Simply put, seasonality is a recurring pattern tied to the calendar or time of day. But unlike stock seasonality (which is heavily studied), FX seasonality flies under the radar a bit more.

The beauty is that some of these patterns are remarkably durable. Why? Because they’re driven by real economic activity that happens regardless of whether traders know about it or not.

Take month-end rebalance flows. Even if every trader on the planet knows that certain funds rebalance at month-end, guess what? Those funds still have to do it. Their mandates require it. It’s not optional.

This creates predictable pressure that you can potentially exploit.

But here’s where most traders go wrong: they confuse correlation with causation. They see a pattern in historical data (like “USD/JPY tends to rise in October”) without understanding the underlying drivers.

And that’s dangerous as hell.

Because without understanding why a pattern exists, you have no way of knowing if it will persist.

Common Calendar-Based Seasonal Effects

Let’s break down some of the major seasonal patterns and see which ones hold water.

Turn-of-Month Effects

The turn of the month in FX is fascinating. In equity markets, there are well-documented effects where month-end rebalancing influences returns.

FX has its own version.

At month-end, large asset managers have to rebalance their portfolios. If U.S. equities outperformed European equities during the month, a European investor with a currency-hedged U.S. position suddenly has too much dollar exposure. They need to adjust their hedges.

This creates predictable buying or selling pressure on certain currencies.

For example, if U.S. stocks have risen sharply during a month, foreign investors holding those stocks may need to sell dollars and buy their home currency to rebalance hedges. Conversely, a weak stock month can trigger dollar buying.

Is this still a viable edge? I think it’s worth looking into. Because these flows are driven by mandated institutional behavior that can’t just stop or be easily absorbed.

Day-of-Week Patterns

Now here’s where things get dicey.

You might have heard people talk about day-of-week effects. “Never sell yen on a Monday.” “The dollar always rallies on Fridays.” That sort of thing.

The data now shows that most of these patterns have disappeared – if they ever existed at all.

The only real “weekend effect” left is weekend gap risk. Important news over the weekend can cause a currency to jump or drop at Sunday open, and liquidity is typically lower at the week’s start.

If you dig into the data, you’ll find a small, noisy tendency for risk-off currencies (CHF, JPY) to get bid up into the weekend and sold off at the market open.

CHF and JPY day of week seasonality. Chart: robotwealth.com

Month-of-Year Patterns

What about monthly seasonality? Like “sell in May and go away” but for currencies?

There are some noteworthy patterns here. For instance, the Japanese yen has historically strengthened in August. Long-term studies found USD/JPY fell (yen rose) in roughly 68% of Augusts over a multi-decade sample.

Why? A mix of factors: reduced risk appetite in late summer (favoring safe-haven currencies like JPY) and Japanese investors repatriating funds ahead of the September half-year.

But here’s the catch – these tendencies are statistical, not guaranteed. USD/JPY’s historical October strength didn’t materialize in 2019 (it was flat), and in 2020, it fell in October, contrary to the seasonal pattern.

The lesson is that while seasonal averages can inform a bias, each year’s outcome can deviate greatly due to prevailing fundamentals. Use these patterns as gentle tailwinds, not certainties.

Intraday Seasonality

Now we’re getting to the good stuff.

Intraday patterns tied to global trading sessions are among the most persistent and practical seasonal effects in FX. Why? Because they’re based on the physical reality of business hours and liquidity flows.

The downside is that edges from intraday return patterns are very small. They’re hard to harness (though not impossible) under retail trading conditions.

There are some volatility patterns that can be useful, although these typically aren’t a direct source of edge.

The Asian Session

The Asian trading hours (roughly 5pm to 2am GMT) are typically the calmest for major currency pairs. Volatility and trading ranges are often the lowest of the day.

Of course, there are exceptions. News from that region (like a surprise Bank of Japan statement) can cause sharp moves. But on average, the Asian session is the quietest.

The London/New York Overlap: Action Central

When Europe and North America are both active (approximately 8am–12pm New York time), the FX market hits its high gear. This session overlap consistently features the highest trading volume of the day.

It’s also when major market-moving news often occurs, and when traders in London and New York are executing the bulk of daily orders. That doesn’t mean you can act on these moves, of course.

Researchers have noticed that short-term counter-trend strategies have been successful during this period, especially on certain pairs such as EUR/USD. USD/JPY.

And if you dig into the data, you do find such an effect. Essentially, you’ll find that trading counter to the recent trend during this period of the day is consistently profitable.

Unfortunately, that comes with a major caveat: that you can trade for free.

It turns out that this is a consistent but tiny pattern that you won’t be able to execute under retail conditions.

Here’s how the cost-free backtest of such a strategy looks on EURUSD:

Cost-free intraday reversal strategy on EURUSD. Chart: robotwealth.com

The average profit per round trip here is tiny, so if you add costs, it unfortunately dies a horrible death.

This is a great example of a real effect that you can’t trade directly. But you may be able to layer it on top of other effects and incorporate it into a portfolio of alpha signals.

Critical Times of Day: New York Open and London Fix

Within the broader sessions, certain times exhibit repeatable market behavior.

The New York open (around 8:00-9:00am NY time) often brings a burst of volatility as U.S. traders react to overnight developments. Often, key U.S. economic reports are scheduled at 8:30am, making this a time when sharp moves can occur.

Of course, you’re unlikely to have an edge trading these events directly. But it’s useful to know that this period often sees higher volatility.

The London close (4pm London/11am NY) is another noteworthy intraday milestone. This is the time of the widely-tracked WM/R Reuters fixing rate for currencies, and many large institutions execute portfolio adjustments at this fix.

Frequently, there’s a surge of volume around 4pm London. For example, if significant month-end buying of EUR/GBP needs to be done, you might see EUR/GBP spike leading into the fix.

These fixing flows can temporarily push a currency pair around. I haven’t done this one myself, but have heard of traders attempting to “fade” the fix move – i.e., if a currency was artificially pushed up by fix-related buying, they might short it right after 4 pm, expecting a retracement once that demand subsides.

The Home vs. Away Time Zone Effect

This is my favorite intraday seasonal pattern, and it’s backed by USD/JPY.

The idea is very simple: currencies tend to depreciate during their home session and appreciate during foreign sessions.

In plainer terms, a currency tends to fall in value when its own country’s markets are open, and rise when they are closed.

For example, studies found that the euro (EUR/USD) tends to weaken during the European business day (as European companies buy foreign currencies) and then strengthen during U.S. hours. Similarly, USD/JPY has historically fallen in Tokyo trading (USD down, yen up) but risen during New York trading (USD up, yen down).

This effect is attributed to institutional and commercial order flow: businesses and investors in a given country are net buyers of foreign currency during their daytime (e.g., importers buying USD in Europe, weakening EUR), while the opposite happens when the foreign markets are active.

Here’s a plot that shows the average intraday pattern for the US dollar quoted in Euros. Bars represent the average return to that hour, the line represents average cumulative returns throughout the day. The blue dashed lines represent European business hours.

USD returns in Euros, European business hours. Chart: robotwealth.com

What’s remarkable is that this intraday seasonality has proven extremely persistent – it’s existed “since forever,” as one long-time FX strategist noted. A simple strategy of shorting USD/JPY during Tokyo hours and buying USD/JPY during New York hours has generated consistent profits for years.

It’s another one of these trades without much wiggle room. But it does have slightly more than the intraday reversal trade I showed you previously. If you’re judicious with your choice of broker and how you actually structure this trade, you can make it work under retail conditions.

The backtest below looks very good, but be aware that the average round-trip profit is only a handful of pips. It’s very sensitive to costs.

Home vs away currency seasonality strategy. Chart: robotwealth.com

Because positions are held only for a few hours (not scalable to huge volumes) and the pattern is tied to fundamental flows, it hasn’t been arbitraged away by big players.

This is a prime example of a real seasonal edge that a retail trader can exploit – provided you have low trading costs and discipline.

Which Patterns Last and Which Fade?

Not all seasonal patterns are created equal – some have proven persistent over decades, while others have decayed or reversed as market conditions evolve.

Persistent Patterns (Still Working)

Generally, seasonality rooted in fundamental economic behaviors tends to persist. The intraday “home vs away” effect is a great example – it’s driven by the continuous need for businesses to exchange currencies in certain time windows.

As long as global trade and investment flows exist, this daily pattern is likely to continue, and indeed it has remained consistent from the 1990s through the 2020s.

Similarly, month-end rebalancing flows are based on institutional portfolio practices that recur each month/quarter end. These, too, continue to cause observable effects (though the exact impact can vary with market volatility).

Even well-known calendar anomalies like the January effect (currencies of countries with strong January stock markets tend to appreciate that month) appear to have survived in the data. A 2019 study noted that January and December FX effects “have not been arbitraged away” over a nearly 50-year sample.

In short, if there is a structural reason for a pattern (be it corporate cash flows, investor behavior, or central bank operations), the pattern can remain sustainable even when known. FX markets are so large and driven by real economic needs that a macro-based cycle can persist despite traders being aware of it.

Decaying or Defunct Patterns

On the other hand, some seasonal quirks have faded away or even inverted over time. Often, these were statistical artifacts or once-profitable strategies whose underlying reason for being has changed.

For example, day-of-week anomalies that were reported in the 1980s (like a tendency for the U.S. dollar to rise on Fridays) largely disappeared by the 2000s.

Why do patterns decay? Often, because of market adaptation. Once an inefficiency is widely recognized and easy to trade, many participants jump in, and their actions arbitrage away the profit.

But the flows in FX are so large, and the effects so marginal, that they’re unattractive to the bigger players. So it’s more about structural shifts – such as changes in monetary policy regimes, evolving economic conditions, or geopolitical shifts – that can alter or break seasonality. A pattern based on, say, interest rate differentials might vanish if global rates converge to zero (as happened in the 2010s).

The FX seasonal patterns that have stood the test of time tend to be those grounded in fundamental flows or human behavior cycles (mandated rebalancing, commercial buying and selling, risk aversion). More superficial or coincidental patterns tend to fade.

The Flow Drivers Behind FX Seasonality

Seasonal patterns in currency markets don’t arise by magic. They are the aggregate result of many recurring institutional flows and behaviors. Understanding why a pattern exists can help you judge if it’s likely to persist.

Corporate Cash Flows and Hedging

Multinational corporations and import/export businesses generate huge currency transactions according to regular schedules. Companies tend to convert currency during their local working hours, creating predictable intraday pressure.

For example, a European importer buying from the US will routinely sell euros for USD during European daytime, contributing to euro weakness in that window. Conversely, U.S.-based funds investing abroad might swap USD for foreign currency during U.S. hours, boosting those foreign currencies when New York is active.

Month-end and quarter-end are also important for corporations: many firms repatriate earnings or adjust hedges at quarter-end, leading to spikes in demand for their home currency.

A notable case is Japanese corporations around the fiscal year-end (March 31) – they often bring overseas profits home, which historically added strength to the yen in March. Similarly, European companies with calendar year-ends might do heavy FX conversions in late December.

Institutional Portfolio Rebalancing

Large asset managers (pension funds, sovereign wealth funds, etc.) regularly rebalance their portfolios, usually monthly. This is the root of the turn-of-the-month effect in FX.

Suppose U.S. equities outperform European equities in a given month. A Eurozone investor with a hedged S&P 500 position will find their USD hedge too small (because the U.S. stocks rose in value). At month-end, they will sell euros and buy USD to increase the hedge, potentially lifting USD.

Conversely, a weak U.S. stock month could prompt USD selling by foreign investors (reducing hedge). On the flip side, US-based global funds rebalance by buying or selling foreign currencies.

These flows are sizable and fairly routine, which is why every month-end, many banks publish predictions for which currencies will see buying or selling pressure. The effect often concentrates around the London fix on the last trading day.

Seasonal Trade and Investment Flows

Some FX seasonality stems from recurring economic cycles. For example, countries that rely on seasonal commodities or tourism can see predictable currency demand at certain times.

The Canadian dollar, benefiting from oil-related inflows around futures settlement, is one example. Another is the tourism effect: currencies of countries with big tourist seasons (say, the euro for Europe, or the Canadian dollar for Thailand) often strengthen during peak tourist months when foreign visitors convert money.

There’s also the tendency for emerging-market currencies to do well in January – investors often start the year allocating fresh capital to EM markets (the so-called January effect), boosting those currencies, then sometimes pulling back later in the year.

Macro Fund Positioning and Risk Cycles

Hedge funds and speculative traders can also create seasonal patterns through collective behavior. One example is the “risk-on/risk-off” seasonal tilt – historically, the late summer and early autumn have seen market turbulence (many past crises and sell-offs peaked in September/October).

As a result, some funds preemptively reduce risk positions over the summer, which can lead to strength in safe-haven currencies (USD, JPY, CHF) and weakness in growth-sensitive ones (AUD, emerging currencies).

Conversely, towards year-end, there is often a “Santa rally” in stocks and higher-yielding assets, which can cause USD or JPY to weaken in December as investors re-engage in carry trades or risk positions.

Additionally, funds often close out positions before their fiscal year-end (locking in profits or trimming losses for reporting), which can mute trends in December or even cause temporary reversals as crowded trades are unwound.

Of course, these are all very noisy, marginal effects and there’s no guarantee that they’ll play out in any given year.

Government and Central Bank Actions

Even official sector actions can have seasonal elements. Some central banks follow quarterly schedules for certain operations (e.g., reserve accumulations, rolling over forward contracts, etc.), which can introduce patterns.

For instance, if a central bank regularly buys foreign currency to increase reserves at the start of each quarter, its local currency might consistently dip around those times. Government budget cycles and tax deadlines can also play a role. For example, U.S. corporate tax repatriation around April, or emerging market governments converting foreign exchange for debt payments at set intervals.

The Key Takeaway

When you know the likely cause of a seasonal pattern, you can trade it with more confidence and adapt as needed. If you see, for example, that December tends to bring USD weakness, knowing it’s due to global portfolio adjustments and lower liquidity can help you judge if the pattern will hold (and be cautious if a new factor – say a Fed meeting – could override it).

The Danger of Overfitting and Changing Market Dynamics

While FX seasonality can offer real trading edges, it’s also a field rife with potential pitfalls. You must be cautious not to overfit – seeing a pattern in past data that isn’t truly predictive – and remain alert to shifts in market behavior that can nullify past patterns.

Overfitting and Data Mining

The FX market has an abundance of data, and if you slice and dice it enough, you’re bound to find something that looks like a pattern.

For example, one could analyze 20 years of EUR/USD and “discover” that it rises on the third Tuesday of every February more often than not. But such a finding could be pure coincidence – a result of looking at hundreds of combinations until one happened to show a pattern. Trading on it would be folly, as there’s no reason to expect it to continue.

This is the classic overfitting problem: a strategy that would have perfectly exploited the past (often by using many parameters or specific dates) but has no genuine edge in the future.

Avoiding overfitting requires discipline and clear thinking: focus on patterns that have a sound explanation and that show consistency across multiple sample periods, not just cherry-picked time frames. If a seasonality appeared in the 1990s but not in the 2010s, be skeptical.

Shifting Market Regimes

Markets are dynamic. Regulations change, technologies improve, participant makeup shifts, all of which can alter or erase seasonal trends.

If you read a study from the 1980s about a Monday effect or a noon hour effect, verify it against current data – the FX landscape in 2023 is very different from 1985.

Global economic regime changes also matter. Consider the era of near-zero interest rates (mid-2010s): carry-trade seasonality or interest-related patterns became muted when every currency had similar rates.

The prudent approach is to treat seasonal strategies as living hypotheses.

Keep monitoring performance: if a usually reliable pattern starts losing money, investigate why. Has something fundamentally changed, or is it just a normal statistical deviation?

This is complicated by the fact that some seasonal edges only come around monthly or yearly. So you don’t have much data to go on. This is another key reason why understanding the fundamental driver of the effect is critical – you can’t rely on your trading P&L alone to tell you if something’s stopped working.

Sometimes patterns go through doldrums but then return (e.g., maybe two odd years of no January effect, then it comes back). But other times, it’s gone for good. Don’t be the trader stubbornly sticking to a “used-to-work” strategy without analyzing current evidence. Adapt your models and don’t be afraid to retire a seasonal rule if it’s no longer valid. At the same time, respect what you know and what you don’t know – trading is all about taking sensible bets in the face of uncertainty. You’ll never be able to completely remove uncertainty.

Practical Tips for the Systematic Trader

For a systematic trader or retail FX enthusiast, how can one actually apply seasonal insights in a real-world trading strategy? Here are some practical pointers to consider:

Focus on High-Confidence Patterns

Stick with seasonal patterns that have strong evidence and rationale. Intraday session biases (like the home/away effect), weekend effects, and month-end flows are good candidates. These have persisted over decades and are supported by fundamental drivers.

For example, you might implement a simple time-of-day strategy: trade EUR/USD long during the New York session and short during the European session each day, attempting to capture the drift.

Such a strategy won’t make you rich overnight – the edge per trade is tiny – but trading is a grind. That’s the nature of the beast. Importantly, because this edge is grounded in daily corporate flow, it’s less likely to suddenly invert.

If you do this, stick to major pairs that you can trade cheaply (EUR/USD, USD/JPY, GBP/USD) so that transaction costs don’t eat the edge. One example strategy on EUR/USD had to pay only ~0.1–0.2 pip spread on each trade and achieved a net Sharpe of 0.7. If you tried the same on a minor currency with a 2 pip spread, you’ll get nowhere. So, alignment of strategy and instrument liquidity is key.

Incorporate Seasonality as a Filter or Weight

It’s rarely wise to have a trading system that only trades on a seasonal rule (e.g., “buy GBP every September 1st and close end of the month” as a standalone strategy). A more robust approach is to use seasonality to tilt the odds in your favor in combination with other analyses.

For instance, if your primary strategy is trend-following or mean-reversion based on other signals, you could modulate it with seasonal context. Suppose your system gives a buy signal on AUD/JPY in late December – knowing that early January often sees yen strength (risk-off) might make you more conservative, perhaps taking a smaller position.

Conversely, if you get a buy signal on a currency during its historically strong period, you might allocate slightly more risk to that trade.

A systematic trader can do this by, say, having a rule that adds a filter: “If historical seasonality bias this week is strongly opposite my signal, either skip the trade or require a higher confidence threshold.”

If you have more of a quant trading bent, you can model these effects directly and incorporate them into a bigger portfolio construction tool.

This way, seasonality is supporting your strategy rather than driving it entirely – a safeguard against going against known flows.

Think in Probabilities and Manage Risk

Seasonal edges are about shifting probabilities, not certainties. You might know that, historically, EUR/USD has risen roughly 60% of the time during the London/New York overlap on Fridays (hypothetically). That’s a favorable bias, but it still means 40% of the time it falls.

Thus, any single trade can lose – don’t gamble the farm on one occurrence of a seasonal pattern. Instead, treat it as a repeated game. If your strategy exploits a bias that gives you, say, a 0.2% edge per trade, you need to play that game many times to realize the profit.

Use proper position sizing that ensures you stay alive. Over a large sample (months or years of trades), if the edge is genuine, you should come out ahead.

Patience and consistency are crucial. Don’t abandon a sound seasonal strategy after two losing trades, but also be aware that the environment can truly change. There’s a tension here that you’ll need to resolve, but when you have a solid reason for the edge persisting, err on the side of letting it play out.

Be Mindful of Transaction Costs and Slippage

Many seasonal strategies involve frequent trading (daily or intra-daily). For a retail trader, costs like the bid-ask spread and any commissions are a serious consideration. An edge might be only a few pips per trade on average. If your spread is 1-2 pips, that could wipe out the expected gain.

That’s why high-volume pairs and a low-cost broker are important. Additionally, executing trades at the exact timing (like right at session open or fix) can be tricky due to slippage or rapid moves. You might need to place orders slightly before or use limit orders to control execution price.

You should get into the habit of monitoring your execution and your costs against what you expected. If the assumptions in your research turn out to be erroneous, you want to know about it as quickly as possible.

The good news is that for major FX pairs, costs are very low nowadays (often under 0.2 pips effective cost per trade for EUR/USD). This means a retail trader with the right broker can indeed capture small seasonal edges that a decade or two ago might have been drowned out by high spreads.

Conclusion: What This Means for You

FX seasonality can be a powerful ally for traders, offering a probabilistic edge. The patterns that still work tend to be those grounded in the fundamental ebb and flow of global money, and these can be integrated into systematic strategies with positive results.

For me, the biggest lesson from studying FX seasonality has been this: the best edges don’t come from fancy indicators or elaborate systems. They come from understanding the real-world behaviors that drive markets.

When you grasp why certain patterns exist – the corporate flows, the institutional mandates, the human behaviors – you gain confidence in your trading that no amount of backtesting can provide.

As a systematic trader, your greatest advantage is flexibility. You’re not locked into trading a single strategy or market like many institutional traders. You can adapt, combining multiple edges from different markets into a robust portfolio.

FX seasonality is just one tool in that arsenal, but it’s a powerful one when used correctly.

Remember, uncertainty is everywhere in trading. But you can stack the odds in your favor by combining solid data analysis with a deep understanding of what drives the patterns you’re trading.

The seasonal patterns that have persisted for decades, like the intraday home/away effect or month-end flows, give us a glimpse into the clockwork behind the seemingly random market movements. And that glimpse can be invaluable.