Talking Points:

- In April, it’s typical to see the US Dollar decline; this year, the greenback has been weaker than seasonality suggests..

- DXY weakness, seasonally, can be attributed to its largest component, the Euro (57.6% of weighting).

- April is the third-best month of the year for US equity markets.

See the full rundown of seasonal patterns broken down by currency pairs below, and to receive reports from this analyst, sign up for Christopher’s distribution list.

The beginning of the month warrants a review of the seasonal patterns that have influenced forex markets over the past several years. For April, as we did for all of 2016 and thus far in 2017, we have expanded our focus on the period of 1997 to 2016 in recognition of the evolving relationship between economic data, central banks, and financial markets.

The longer observation period captures several crisis events/periods that traders may find analogous to events unfolding today, even as the ramifications from Brexit are unclear: the Asian crisis; the US tech bubble; the US housing bubble; the global commodity bubble; and previous rate hiking and rate cutting cycles, from the major central banks, during times normal (pre-2008) or extraordinary (post-2008). By increasing the sample size to 20 years, we believe the statistical stability of the estimates will have increased relative to utilizing a shorter time-frame/smaller sample size.

April Forex Seasonality Sees USD Weakness versus AUD, GBP, and EUR

Forex Seasonality in Euro (via EURUSD)

April Forex Seasonality Sees USD Weakness versus AUD, GBP, and EUR

April is a slightly bullish month for EUR/USD, from a seasonality perspective. The pair has rallied 55% of the time in April over the past 20-years, and its average performance was +78-pips per month. EUR/USD has gained ground in four consecutive years and five of the past six overall.

Forex Seasonality in British Pound (via GBPUSD)

April Forex Seasonality Sees USD Weakness versus AUD, GBP, and EUR

April is a bullish month for GBP/USD, from a seasonality perspective, due to its consistent performance metrics. The pair has appreciated 75% of the time in April over the past 20-years, and its average performance during this time frame was +180-pips per month. GBP/USD has gained in every April since 2005, and in all but one year since 2001 (April 2004).

Forex Seasonality in Japanese Yen (via USDJPY)

April Forex Seasonality Sees USD Weakness versus AUD, GBP, and EUR

April is a neutral month for USD/JPY, from a seasonality perspective, due to its inconsistent performance metrics. The pair has depreciated 55% of the time in April over the past 20-years, and its average performance during this time frame was -4-pips per month. USD/JPY has lost ground in three consecutive Aprils, with its worst performance over the past 20-years coming in April 2016.

Forex Seasonality in Australian Dollar (via AUDUSD)

April Forex Seasonality Sees USD Weakness versus AUD, GBP, and EUR

April is a very bullish month for AUD/USD, from a seasonality perspective, due to its consistent performance metrics long-term: the pair has rallied 70% of the time over the past 20-years. The pair’s average performance during this time frame was +117-pips per month.

Forex Seasonality in DXY Index

April Forex Seasonality Sees USD Weakness versus AUD, GBP, and EUR

From a seasonality perspective, April is a bearish month for the DXY Index. The aggregate tracker of greenback value has depreciated 65% of the time in April over the past 20-years, losing -1.5-points per month during that timeframe. The DXY Index has lost ground in every April since 2011.

Forex Seasonality in New Zealand Dollar (via NZDUSD)

April Forex Seasonality Sees USD Weakness versus AUD, GBP, and EUR

April is a very bullish month, from a seasonality perspective, for NZD/USD. The pair has spent the majority of its time trading higher in April over the past 20 years (70%), and its average performance during this time frame was +82-pips per month. NZD/USD has rallied two straight years and three of the past four overall.

Forex Seasonality in Canadian Dollar (via USDCAD)

April Forex Seasonality Sees USD Weakness versus AUD, GBP, and EUR

April is a bearish month for USD/CADfrom a seasonality perspective. The pair has depreciated 70% of the time in April over the past 20-years, and its average performance during this time frame is -164-pips per month . Recently, USD/CAD has lost ground in every April since 2011, and has only had one year since 2006 (April 2010) in which it’s rallied.

Forex Seasonality in Swiss Franc (via USDCHF)

April Forex Seasonality Sees USD Weakness versus AUD, GBP, and EUR

From a seasonality perspective, April is a slightly bearish month for USD/CHF, due to its inconsistent performance during the last 20-years. The pair has depreciated 55% of the time in April over the past 20-years, but its average performance during this time frame was -34-pips per month. Recently, USD/CHF has depreciated in four consecutive years.

Forex Seasonality in S&P 500

April Forex Seasonality Sees USD Weakness versus AUD, GBP, and EUR

April is typically a bullish month for the S&P 500, from a seasonality perspective, the thurd-best month of the year. The index has spent the majority of its time (75%) gaining ground in April over the past-20 years, with the month producing an average performance of +21.22-points. April has produced gains in four consecutive years, with only one losing year (April 2012) since 2006.

Forex Seasonality in Gold

April Forex Seasonality Sees USD Weakness versus AUD, GBP, and EUR

From a seasonality perspective, April is a bullish month for Gold, due to its consistent performance metrics. Gold has appreciated 65% of the time in April over the past 20-years, and its average performance during this time frame was +$6.57/oz per month. Recently, Gold has gained ground in three straight years.

Read more: FX Markets Look to RBA Rate Decision, FOMC Minutes, March US NFPs

--- Written by Christopher Vecchio, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX.

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