FX Pre-Summer Push to Highs and Lows?
|There is a fairly consistent seasonality to the Forex Market (trending, non-trending, trending) and 2017 delivered beautifully with an increase in volatility and pre-summer pushes that offered some trends and even some extremes. With June around the corner the adage "sell in may - go away" may help the markets insert some seasonal highs and lows where we can expect to see a lull in volatility, retracements from these pushes, and ranges to trade.
The USD has been battered and bruised during the pre-summer push as the EURUSD and USDCHF venture into key support and resistance levels. The EUR was was of the big winners with a major breakout above 1.1000. April-May have witnessed risk aversion from a variety of sources including but not limited to the Trump Administration scandal, stock market 1%+ selloff and scare, VIX spike, tensions in Middle East, Russia, and North Korea, and surely there will be others (ongoing Brexit woes for one).
I am most interested in observing how dramatic the slowdown may be day to day in the markets after several weeks of reasonable volatility. Summer tends to bring a slowdown, ranges, consolidation, choppy price action, etc. so traders either adapt to the conditions or go on vacation and await an August/September volatility boost. If a slowdown is upon us, the markets may favor yield, so look to currencies with carry. Of the majors, NZD/AUD/USD lead the pack with 1.75%/1.50%/1.00% respectively. Although the USD has had a dark cloud overhanging since a Presidential jawbone, the Fed's desire to shrink the balance sheet, and everything being data dependent, the Fed may still stay the course with tightening monetary policy and provide some greenback some resiliency.
The Forex market is always interesting and my finger is always on the pulse trying to plan and prepare for what's next. Happy Trading and Happy Summer!!! CLICK HERE to see the supporting video.
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