US Dollar Rallies; Gold & Stocks Rebound

October FX Seasonality Overview:

• The tenth month of the year typically sees more positive results for the US Dollar.
• The Euro and the Japanese Yen tend to underperform the rest of the majors in October.
• October has been a better month for both gold prices and US stocks.

The beginning of the month warrants a review of the seasonal patterns that have influenced forex markets over the past several years. For October, our focus is on the trailing 5-year and 10-year performances, both of which capture trading during the winddown of aggressive central bank intervention beginning with the 2008/2009 Global Financial Crisis – not dissimilar from the environment we find ourselves in now.

Yet at the start of the fourth quarter, as has been the case for much of 2022, the ahistorical environment has reduced the reliability of using seasonality as a meaningful guide for price action. Russia’s invasion of Ukraine continues to disrupt energy markets, global supply chains remain ensnared with China’s zero-COVID strategy, and developed economies are increasingly nearing stagflation. Accordingly, strategies based around seasonality tendencies are still unreliable compared to previous years.

Monthly Forex Seasonality Summary – October 2022

Forex Seasonality in Euro (via EUR/USD)

October is a bearish month for EUR/USD, from a seasonality perspective. Over the past 5-years, it has been the third worst month of the year for the pair, averaging a loss of -0.49%. Over the past 10-years, it has been the third worst month of the year, averaging a loss of -0.59%.

Forex Seasonality in British Pound (via GBP/USD)

October is a mixed month for GBP/USD, from a seasonality perspective. Over the past 5-years, it has been the third best month of the year for the pair, averaging a gain of +0.83%. Over the past 10-years, it has been the sixth worst month of the year, averaging a loss of -0.02%.

Forex Seasonality in Japanese Yen (via USD/JPY)

October isa bullish month for USD/JPY, from a seasonality perspective. Over the past 5-years, it has been the third best month of the year for the pair, averaging a gain of +0.38%. Over the past 10-years, it has been the second best month of the year, averaging a gain of +1.08%.

Forex Seasonality in Australian Dollar (via AUD/USD)

October is a slightly bullish month for AUD/USD, from a seasonality perspective. Over the past 5-years, it has been the sixth worst month of the year for the pair, averaging a loss of -0.01%. Over the past 10-years, it has been the third best month of the year, averaging a gain of +0.30%.

Forex Seasonality in New Zealand Dollar (via NZD/USD)

October isa mixed month for NZD/USD, from a seasonality perspective. Over the past 5-years, it has been the sixth worst month of the year for the pair, averaging a loss of -0.05%. Over the past 10-years, it has been the sixth best month of the year, averaging a gain of +0.22%.

Forex Seasonality in Canadian Dollar (via USD/CAD)

October is a bullish month for USD/CAD, from a seasonality perspective. Over the past 5-years, it has been the fourth best month of the year for the pair, averaging a gain of +0.48%. Over the past 10-years, it has been the fourth best month of the year, averaging a gain of +0.62%.

Forex Seasonality in Swiss Franc (via USD/CHF)

October is a bullish month for USD/CHF, from a seasonality perspective. Over the past 5-years, it has been the fifth best month of the year for the pair, averaging a gain of +0.51%. Over the past 10-years, it has been the second best month of the year, averaging a gain of +0.60%.

Forex Seasonality in US S&P 500

October isa bullish month for the US S&P 500, from a seasonality perspective. Over the past 5-years, it has been the fourth worst month of the year for the index, averaging a gain of +0.29%. Over the past 10-years, it has been the fifth best month of the year, averaging a loss of +1.26%.

Forex Seasonality in Gold (via XAU/USD)

October is a mixed month for gold (XAU/USD), from a seasonality perspective. Over the past 5-years, it has been the sixth worst month of the year for the precious metal, averaging a gain of +1.05%. Over the past 10-years, it has been the fifth worst month of the year, averaging a loss of -0.16%.

— Written by Christopher Vecchio, CFA, Senior Strategist