March Forex Seasonality Sees Neutral Month for USD After February Rebound

Talking Points:

- In March, it’s typical to see the US Dollar rally versus the British Pound and the Japanese Yen.

- DXY strength, seasonally, has not been aided by its largest component, the Euro (57.6% of weighting).

- US equity markets love the end of the first quarter; March has produced rallies 65% of the time since 1997.

The beginning of the month warrants a review of the seasonal patterns that have influenced forex markets over the past several years. For March, as we did for all of 2016 and thus far in 2017, we have expanded our focus on the period of 1997 to 2016 in recognition of the evolving relationship between economic data, central banks, and financial markets.

The longer observation period captures several crisis events/periods that traders may find analogous to events unfolding today, even as the ramifications from Brexit are unclear: the Asian crisis; the US tech bubble; the US housing bubble; the global commodity bubble; and previous rate hiking and rate cutting cycles, from the major central banks, during times normal (pre-2008) or extraordinary (post-2008). By increasing the sample size to 20 years, we believe the statistical stability of the estimates will have increased relative to utilizing a shorter time-frame/smaller sample size.

Forex Seasonality in Euro (via EURUSD)

March is a neutral month for EUR/USD, from a seasonality perspective, due to a lack of clear trend over the past 20-years. The pair has split time evenly between gains and losses in March, and its average performance was only +14-pips per month. EUR/USD gained in March 2016, after having depreciated in each of the three previous Marches.

Forex Seasonality in British Pound (via GBPUSD)

March is a neutral month for GBP/USD, from a seasonality perspective, due to its inconsistent performance metrics. The pair has appreciated 55% of the time in March over the past 20-years, but its average performance during this time frame was -32-pips per month. GBP/USD had its best March during the observation period in March 2016, after its worst performance ever for the third month of the year during March 2015.

Forex Seasonality in Japanese Yen (via USDJPY)

March is a bullish month for USD/JPY, from a seasonality perspective. The pair has rallied 60% of the time in March over the past 20-years, and its average performance during this time frame was +91-pips per month. USD/JPY lost ground in March 2016 after rallying every year going back to 2009.

Forex Seasonality in Australian Dollar (via AUDUSD)

March is a slightly bullish month for AUD/USD, from a seasonality perspective, due to its inconsistent performance metrics long-term (the pair has split time evenly between gains and losses during the observation period), and its more recent trend of gains in the short-term (AUD/USD has rallied in six of the past 8 Marches).The pair’s average performance during this time frame was +26-pips per month.

Forex Seasonality in DXY Index

From a seasonality perspective, March is a neutral month for the DXY Index. The aggregate tracker of greenback value has split time evenly between gains and losses in March, adding +0.18-points per month during that timeframe. The DXY Index had gained ground each March from 2012 to 2015, before posting its worst March ever in 2016.

Forex Seasonality in New Zealand Dollar (via NZDUSD)

March is a neutral month, from a seasonality perspective, for NZD/USD. The pair has spent a slight majority of its time trading lower in March over the past 20 years (55%), and its average performance during this time frame was only +9-pips per month. NZD/USD has rallied in six of the eight Marches since the financial crisis.

Forex Seasonality in Canadian Dollar (via USDCAD)

March is a bearish month for USD/CADfrom a seasonality perspective. The pair has depreciated 70% of the time in March over the past 20-years, and its average performance during this time frame is -34-pips per month . Recently, USD/CAD has lost ground in three of the past four years, with its worst performance of the past 20-years coming in March 2015.

Forex Seasonality in Swiss Franc (via USDCHF)

From a seasonality perspective, March is a neutral month for USD/CHF, due to its inconsistent performance during the last 20-years. The pair has depreciated 60% of the time in March over the past 20-years, but its average performance during this time frame was +18-pips per month. Recently, USD/CHF had its second-worst March during the observation period in 2016 after posting three consecutive years of gains (2013 to 2015).

Seasonality in S&P 500

March is typically a bullish month for the S&P 500, from a seasonality perspective, the second-best month of the year. The index has spent the majority of its time gaining ground in March over the past-20 years, with the month producing an average performance of +23.65-points. March has produced gains in four of the past five years, with its second-best March during the performance period coming in 2016.

Seasonality in Gold

From a seasonality perspective, March is a bearish month for Gold, due to its consistent performance metrics. Gold has depreciated 70% of the time in March over the past 20-years, and its average performance during this time frame was -$7.93/oz per month. Recently, Gold has posted losses in three straight years, and has only gained ground twice (2011 and 2013) since 2007.