In this article, we argue that there is an interesting seasonal pattern affecting the US dollar’s exchange rate during the month of January. To some extent, the U.S. dollar has a tendency to rise during the month of January, particularly against the Japanese yen. In fact, over the past decade the U.S. dollar rallied against the Japanese yen during 7 out of the last 10 years. It is true that past returns are not indicative of future results. Yet, price patterns do form in the currency market and there are many different ways to incorporate seasonality into your trading.
- Euro Plummets as Euro-zone CPI Falls to More Than 2-Year Low, Suggest ECB Will Cut Rates January 15 - British Pound Rallies Despite Signs of Impending BOE Rate Cut on Thursday - Commodity Dollars Dominate as Risk Appetite Leads Carry Trades Higher
A rebound in risk appetite has thrown many, former ranges into disarray. However, the AUDCAD congestion we have pointed out will both benefit from a sustained rise in yield demand and even a tumble back into risk aversion.
The euro tumbled as Euro-zone CPI estimates show that inflation has fallen below the ECB's 2.0% target, adding to speculation that the bank will cut rates next week. However, the British pound gained along with the commodity dollars, despite indications that the BOE will reduce rates on Thursday - why?
Currency trading markets have started the New Year with a bang, as the US Dollar has already carved out major moves against the Euro and other key counterparts. The sudden jump in volatility has largely benefited our Breakout and Momentum-based trading signals, as our strategies have largely bought into US Dollar strength. Further breakouts and extended momentum would easily favor further gains in said currency trading strategies, and a busy week of economic event risk may make for similarly eventful forex moves in the days ahead. Our favored 1-week volatility measure already shows that traders expect major moves in the week ahead, and we will position ourselves accordingly.