Powell and Lagarde superman

It's a new year of trading but it's also time to look back at some old seasonal patterns.

The US dollar tends to strengthen in January; with an average gain of 0.44% over the past two decades, it's the second-best month for the dollar index.

Where is the dollar strength:

  • It's the second-worst month for EUR/USD
  • It's the worst month for CAD
  • Cable bucks the trend, as it's a decent month for the pound
  • It's the strongest month of the year for gold
  • The oil seasonal period of strength kicks off in February so there's a case for buying a dip sometime this month

But one place to avoid buying the dollar is against the yen. January is the best month for JPY and this year there is some extra incentive for the yen to rally with talk of upward revisions to BOJ inflation forecasts.

Stocks aren't the best place to hide out and that should be fresh in the minds of traders after the peak and drop last January. There is a case for buying washed out tax-loss problem childs but that's a one-week trade at best. It's the fifth-worst month for the MSCI world index, the fifth worst month for the S&P 500 and the worst month for the Nikkei.

On net, EUR/JPY or CAD/JPY shorts are a spot for seasonal traders to watch. Technically, CAD/JPY is in an area of a technical void after touching a nine-month low:

CADJPY daily