At the start of March, I highlighted the seasonals for the month and one of them was yen weakness. Despite all the turmoil, USD/JPY rose about 200 pips in the month. Even AUD/JPY managed a gain in the month.
Another one was oil, and though it started soft, it managed to gain on the month and the strength in crude continues to run through June. There was a big gain yesterday on signs that the US isn’t producing as much as hoped/feared.
Turning the page to April, it’s an optimistic month, despite the angst in the air. Now, I always emphasize that seasonals are just one piece of the toolkit and a modest driver overall. Fundamentals dominate and Trump’s April intentions matter far more than history.
Here are some trends:
1) Australian dollar strength
The theme in the mood is risk appetite and though USD correlations with the ‘risk trade’ are fracturing right now, there is strength in AUD/JPY as well.
2) Cable gains
In the past 21 years, cable has gained 17 times in April, though last year was an exception. It’s by far the best month for cable and the UK seems to have avoided Trump’s ire. Interestingly, former Republican House speaker Kevin McCarthy was on CNBC today talking about using favorable deals with the UK to drive a wedge in Europe.
3) Stock market gains
April is the best month for most global equity indexes and the MSCI World Index has only been down twice in April in the past decade. Notably though, last year bucked the trend as last year it was the only month in a stretch of 11 months that was negative in the S&P 500. Drilling down a bit further, the period of April 5-18 is the strongest.
4) USD/CAD weakness
USDCAD daily
If the US goes easy on tariffs, USD/CAD is likely to be a soft spot. The pair is something of a levered trade on risk assets and commodities, which are all positive in April. Technically, there are a series of lower highs that could set up a decline to 1.40. Of course, it all hinges on what happens tomorrow.