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May was another volatile month in global markets. It’s also a year where the typical seasonal patterns haven’t had a great run.

Looking back at May, the seasonal trend was for strength in USD and weakness in AUD. In the early part of the month, that was a fantastic trade as AUD/USD broke down to 0.6827, which was the worst since June 2020. But the pair bottomed on May 12 and turned around sharply, trading now at 0.7200, up 137 pips in the month.

It was a similar story with euro weakness, as that typical trend played out perfectly in the first two weeks of the month, falling through 1.0350. However higher inflation in Europe and a hawkish pivot from Lagarde combined with a USD retracement to reverse the early-month decline and more.

Even the embattled GBP has managed to eek out a small gain versus the US dollar; running counter to both the chart trend and the seasonal trend.

Looking ahead, the seasonal trends in June are moderate but should be taken into context along with everything else that’s moving markets. They’re one tool in the toolbox and work best when everything else is aligned, or at times when fundamentals have a backseat.

Some trends:

1) Oil still slick

Back in late-March I highlighted the typical seasonal strength in oil from April through June. So far that’s worked as WTI crude rises for the sixth straight week to $117. The tailwind continues in June before the signal flattens out in July/Aug. Note that oil has risen more than 9% in June in four consecutive years.

2) Global equities soft

Central banks are in charge at the moment but all-else-equal, the ‘sell in May and go away’ mantra has some creedence. June is the second-worst month for the MSCI world index, averaging a 0.55% decline since 2000. The weakness is particularly acute in China (worst month) and the UK (tied for the worst month) over the past 20 years. The average decline on the S&P 500 is 0.62% but it has gained in June for six years in a row, sending a conflicting signal.

3) AUD and NZD strength

The weather is cooling down south but both currencies are heating up. The pair traced out reversals in May as the RBA and RBNZ pivoted to more-hawkish stances. Seasonally, there’s a tailwind for AUD in June, which is its second-best month over the past 20 years. It’s also the second-best month for NZD/USD, averaging a 0.85% gain.

4) USD/CHF softness

Given the negative backdrop for risk assets in June, you would expect some USD strength but that hasn’t played out, even against the commodity currencies. It’s a broadly soft month for the US dollar, though only with moderate intensity. One spot to watch is USD/CHF. June is the second-worst month for the pair and it’s declined in 10 of the past 12 years. A hawkish pivot from the SNB could make for a big move in 2022.

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