A look at the seasonal patterns for May 2020:
Welcome to May.
Coronavirus is dominating everything as central banks and governments try to counter the massive demand shock with unprecedented amounts of spending. In April, somehow the seasonal patterns were a total success.
The scoreboard is wiped clean again in the new month and I would emphasize that this is not a good time for seasonal investing. However if the seasonals lineup with the techs and fundamentals, they can add to a great trade.
Here's the rundown:
1) Dollar days are back
May is the best month for the dollar over the past decade. The trade weighted Bloomberg dollar index was up in 8 of the past 9 months of May. The average of +1.53% over the past decade is easily the best of any month. It's the same story in the Dollar Index, if that's your bag.
2) AUD unwinds
I wrote a long article at the start of the week on why the Australian dollar will continue higher. That had a great start with three days of gains. The past two days have given it back and it might be time to hit pause on the trade, given that the seasonals are poor for the Australian dollar. It's easily the owrst month in the past decade with an average 2.33% decline. I think a drop in May will be an opportunity to buy, especially since the seasonals are better in June and July. AUD/USD to 0.6250?
3) Switzerland blooms
I imagine that Switzerland is a beautiful place in May and the trend is for strength in CHF in the month. On average, it's the strongest month over the past decade for the franc against the US dollar. However I would caution that it's fallen 3 years in a row coming into 2020.
4) Euro struggles
May is the worst month for the euro against the dollar but that's not all. It's also a poor month vs GBP and CHF. Over the past decade, the average decline in EUR/USD in the month is 1.76%, including declines in 8 of the past 9 years.