More than three weeks ago, I talked about how USD/JPY has a strong tendency to weaken in the month of August. The year 2010 was no different as USD/JPY ends the month down nearly 3 percent.

Although seasonality does not equal a certainty of USD/JPY weakness, it is worth noting that 83 percent of time, USD/JPY has ended the month lower by an average of 2 percent. Considering that USD/JPY started the month at 86.46, a 2 percent move would put it below its November low of 84.83. Not only did we reach that level, but USD/JPY fell to a low of 83.53 last week - seasonality has proven to be effective once again.

Kathy Lien is Director of Currency Research at GFT, and runs KathyLien.com.