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Monthly Forex Seasonality - January 2022: Start of Year Bodes Well for AUD, GBP, Gold

Monthly Forex Seasonality - January 2022: Start of Year Bodes Well for AUD, GBP, Gold

Christopher Vecchio, CFA,
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January FX Seasonality Overview:

  • The first month of the year tends to see gains for commodities and commodity-linked currencies.
  • January is the best month of the year for gold prices in recent history.
  • Typical losses by the US Dollar tend to bode well for Australian, Canadian, and New Zealand Dollars.
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The beginning of the month warrants a review of the seasonal patterns that have influenced forex markets over the past several years. For December, our focus is on the trailing 5-year and 10-year performances, both of which fully capture trading during the era of quantitative easing and expanding government deficits since the 2008/2009 Global Financial Crisis – not dissimilar from the environment we find ourselves in during the coronavirus pandemic recovery.

However, a caveat is needed at the start of 2022: we are at the beginning stages of a Fed hike cycle. Asset purchases will cease by March, where rates markets are currently pricing in the first 25-bps rate hike from the FOMC. Environments in which the Federal Reserve is hiking rates while other major central banks – mainly the Bank of Japan and European Central Bank – are persisting with stimulative policies tend to produce bullish outcomes for the US Dollar.

Insofar as both EUR/USD and USD/JPY seasonality metrics tend to favor US Dollar weakness, it may be best to discount that perspective this month. The same goes for gold prices, which typically have had a strong start to the year; a stronger US Dollar and rising US Treasury yields tend to be negative for bullion.

Monthly Forex Seasonality Summary – January 2022

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Forex Seasonality in Euro (via EUR/USD)

January is a bullish month for EUR/USD, from a seasonality perspective. Over the past 5-years, it has been the third best month of the year for the pair, averaging a gain of +0.84%. Over the past 10-years, it has been the sixth best month of the year, averaging a loss of -0.08%.

Forex Seasonality in British Pound (via GBP/USD)

January is a bullish month for GBP/USD, from a seasonality perspective. Over the past 5-years, it has been the best month of the year for the pair, averaging a gain of +1.93%. Over the past 10-years, it has been the fourth best month of the year, averaging a gain of +0.12%.

Forex Seasonality in Japanese Yen (via USD/JPY)

January is a very bearish for USD/JPY, from a seasonality perspective. Over the past 5-years, it has been the worst month of the year for the pair, averaging a loss of -1.25%. Over the past 10-years, it has been the worst month of the year, averaging a loss of -0.56%.

Forex Seasonality in Australian Dollar (via AUD/USD)

January is a bullish month for AUD/USD, from a seasonality perspective. Over the past 5-years, it has been the second best month of the year for the pair, averaging a gain of +1..24%. Over the past 10-years, it has been the fifth best month of the year, averaging a gain of +0.09%.

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Forex Seasonality in New Zealand Dollar (via NZD/USD)

January is a bullish month for NZD/USD, from a seasonality perspective. Over the past 5-years, it has been the second best month of the year for the pair, averaging a gain of +1.64%. Over the past 10-years, it has been the fifth best month of the year, averaging a gain of +0.28%.

Forex Seasonality in Canadian Dollar (via USD/CAD)

January is a mixed month for USD/CAD, from a seasonality perspective. Over the past 5-years, it has been the worst month of the year for the pair, averaging a loss of -1.31%. Over the past 10-years, it has been the third best month of the year, averaging a gain of +0.74%.

Forex Seasonality in Swiss Franc (via USD/CHF)

January is a very bearish month for USD/CHF, from a seasonality perspective. Over the past 5-years, it has been the third worst month of the year for the pair, averaging a loss of -1.17%. Over the past 10-years, it has been the worst month of the year, averaging a loss of -1.22%.

Forex Seasonality in US S&P 500

January is a bullish for the US S&P 500, from a seasonality perspective. Over the past 5-years, it has been the fourth best month of the year for the index, averaging a gain of +2.8%. Over the past 10-years, it has been the sixth best month of the year, averaging a gain of +1.17%.

Forex Seasonality in Gold (via XAU/USD)

January is a very bullish month for gold (XAU/USD), from a seasonality perspective. Over the past 5-years, it has been the second best month of the year for the precious metal, averaging a gain of +2.77%. Over the past 10-years, it has been the best month of the year, averaging a gain of +4.15%.

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--- Written by Christopher Vecchio, CFA, Senior Strategist

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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