EURUSD January Effect: Fact or Fiction?

The Euro Dollar January effect

The high or low for the year is often recorded during the month of January, from the history of the EURUSD. Since the launching of the Euro in 1999, the high or low of the year was set in January 9 out of 17 years (53%) as shown in the table below. Including the year 2002 and 2011, the January effect occurred more convincingly by 65% or 11 of 17 years( note that in 2002 the low was set on Feb 1 and was by only 9 pips close to be included as the January effect. The January low held till a little before the end of the year in 2011, December 29 to be precise, when there was a 21 pips extension, so it can be included as well).The January effect has occurred less, to about 37.5% over the past 8 years, or to 3 out of 8 years (including 2011) although the height of the financial crisis in 2008-2009 was included in the sample.

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Year January Year Range Low/High Set in Jan
1999 1.1346-1.1885 .9995-1.1885 High
2000 .9667-1.0412 .8228-10412 High
2001 .9118-.9570 .8345-.9570 High
2002 .8574-.9665 .8565-1.0504 Low*
2003 1.0333-1.0905 1.0333-1.2649 Low
2004 1.2352-1.2899 1.1762-1.3670 Neither
2005 1.2922-1.3581 1.1.640-1.3581 High
2006 1.182-1.2325 1.1812-1.3370 Low
2007 1.2877-1.3291 1.2877-1.4908 Low
2008 1.4366-1.4798 1.2331-1.6040 Neither
2009 1.2765-1.4050 1.2458-1.5144 Neither
2010 1.3863-1.4582 1.1878-1.4582 High
2011 1.2875-1.3759 1.2856-1.4939 Low
2012 1.2623-1.3233 1.2041-1.3486 Low
2013 1.2995-1.594 1.2744-1.3821 Neither
2014 1.3478-1.3775 1.2097-1.3993 Neither
2015 1.1098-1.2108 1.0458-1.2108 High

 

 

 

 

 

So is the January Effect fact or Fiction?

From the data shown in the above table, it shows that the effect has lost steam, but it is still a relevant factor in trading, as many still acknowledge this as more of a reality than a myth. Arguing against a January effect is the fact that it has only occurred once in 4 years, which is the year 2015.

The first trading day set the high for the year, which will increase the importance of the 1.0946 recorded on the 4th of January this year.

The January range is quite important and if one or the other side exists in any case, then there will be speculations of a January effect this year; this might affect medium term sentiment, suggesting that January range should be observed to see which side of history will be repeated this year.

 

 

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