Six November forex seasonals patterns to watch

Author: Adam Button | Category: Forex Orders

What are the seasonal trading trends in November

I'm a bit late this month with the seasonal rundown but it's been a sluggish start to the month so you probably haven't missed anything.

It's a month with a few very-notable seasonal biases that you may want to keep in mind. I've got a few of them.

If you want to see how the seasonals did in October, here is the scorecard.

1) US dollar strength
What are the seasonal trading trends in November
It's the second-best month over the past decade for the US dollar index and the Bloomberg dollar index (May is best). The DXY averages a 1.37% gain and is up in 8 of the past 9 Novembers. It hasn't been a great start with the US dollar slumping in the aftermath of the Fed but dollar bears may want to wait a bit longer before pulling the trigger.

2) USD/JPY strength

Drilling down deeper into the US dollar story, the place to bet is USD/JPY rather than against the commodity currencies. This pair has averaged a whopping 2.3% gain in the past decade, which is almost double the second-best month.

3) Japanese stocks

The Nikkei 225 has averaged a 3% gain in the past decade and is up in 7 straight Novembers. It's easily the best month of the year to own Japanese stocks but you might want to hedge the yen exposure because the strength in USD/JPY goes hand-in-hand with this move. It's also a very good month for the S&P 500.

4) Oil is a laggard

The late-year tendency for oil weakness is something I highlight year after year and it came through in a big way last year with a monumental Oct-Dec decline. November is the worst month on average over the past decade but this trade requires a healthy amount of risk management because there have been a number of big swings in both directions. The good news is that I'm a day late with this seasonal idea so the 3.7% rally to start the month is one bullet dodged. With the weakness in oil, CAD is also a bit of a laggard.

5) The natural gas rally continues

I highlighted this trade last month and it's a two-parter. The average gain in gas in November is 5.5% over the past decade. I would warn that there is also some tricky volatility in this one. I checked at how well the trend continues if there's a October rally and there isn't any meaningful correlation over the past 20 years.

6) EUR/GBP weakness

I think there is way too much Brexit risk to be putting on any kind of a GBP seasonal trade but note that over the past 10 years, EUR/GBP has been soft. It's the worst month on the calendar for this pair over the past decade and the average loss is 0.87%.

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