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New Zealand Dollar at Risk, GBP/USD Weakness - FX Seasonality for Month Ahead

New Zealand Dollar at Risk, GBP/USD Weakness - FX Seasonality for Month Ahead

2020-08-04 09:35:00
Justin McQueen, Analyst
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NZD, GBP Analysis & News

  • NZD/USD Underperforms in August (Falling 9 of last 11 years)
  • NZD/JPY at Risk From RBNZ
  • GBP/USD Seasonal Tendency to Weaken in August

Much like in May, the beginning of August typically sees increased noise with regard to seasonal trends at a time in the year that markets tend to be somewhat quieter. That said, this report looks at the seasonal patterns across major G10 FX pairs.

NZD/USD Underperforms in August (Falling 9 of last 11 years)

A striking observation in the August seasonal trends is the tendency for NZD/USD to underperform, which has fallen 9 times in the last 11 years. On average, the pair has dropped 1.8% since 2009, while in the past 5 years the performance has been even worse at -2.58%. In contrast, investors tend to demand safe-havens over cyclical currencies with both the Japanese Yen and Swiss Franc outperforming its counterparts on average since 2009. In turn, this highlights that in a typically more volatile month for risk sentiment, investors tend to be positioned more defensively.

NZD/USD BULLISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -16% -1% -6%
Weekly -4% 20% 12%
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NZD/JPY at Risk From RBNZ

That said, on the seasonal front NZD/JPY appears most vulnerable to the downside. Alongside this, with risks of the RBNZ looking to ease monetary policy further and potentially looking to curb the recent strength in the New Zealand Dollar, this raises the likelihood that NZD/JPY can follow its seasonal pattern.

GBP/USD Seasonal Tendency to Weaken in August

Elsewhere, GBP/USD does not tend to fare well in August with the pair falling 4 times in the last 5 years (-1% on average in the last 5 years). As such, in light of the rally in to 1.31-1.32 in July, the Pound is at risk of a corrective move lower, particularly as CFTC positioning data is yet to show belief in the rally, given that speculators have continued to get more bearish as the Pound has risen.

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FX Seasonality for August

New Zealand Dollar at Risk, GBP/USD Weakness - FX Seasonality for Month Ahead

10 Most Popular Candlestick Patterns

NZD/JPY Price Chart: Daily Time Frame

New Zealand Dollar at Risk, GBP/USD Weakness - FX Seasonality for Month Ahead

Source: IG

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