March month madness

We're at the dawn of another month in the forex market and that's worth a look at the seasonal patterns.

Recapping February, it was another decent one for seasonals. It's the worst month of the year for cable and that was true again as the pair fell to 1.2051 from 1.2308 at the close of January.

Chinese stocks also tend to do well in February and that was certainly true at the start of the month but it was less-true towards the end. Ultimately though, the Shanghai Composite closed higher on the month.

One that didn't work was AUD/JPY which is typically stronger in February but was fractionally lower in February. Overall, looking at the Feb monthly charts, the big story was US dollar strength but that was all about fundamentals as economic data beat estimates.

Given the backdrop of high data dependence, the best trade will be to go with the data again in March, but there are some notable biases in the March seasonals.

First is the continued strength in AUD/JPY. I'm encouraged by February price action, given that it was a tough one for risk assets. The main thing to watch here is what happens at the BOJ and that could certainly overwhelm any kind of seasonal but that backdrop is good through March and April.

If that pair doesn't strike you the right way, the general trend in the yen is weakness in March-April. Overall, the risk trade is positive in March and that's the dominant theme. The averages are a bit screwy due to the pandemic but March-April is a great time to own stocks in general and that will be true again this year if the Fed sticks to its dot plot and economic data begins to cool. We got some good evidence on that front today with US consumer confidence softening.

Oil didn't do much of anything in February and remains trapped in a range but there are positive seasonal signs that run through June as gasoline inventories are built up ahead of summer driving season.

USDJPY monthly
USDJPY monthly