November foreign exchange seasonals
November is an fascinating month for seasonals as a result of there are just a few robust developments and a few that usually interrupted.
Cable is an fascinating instance. One the face of it, the 0.42% common decline over the previous 20 years is unremarkable however whenever you strip out the previous two US Presidential elections (2020 and 2016) there is a exceptional sample of GBP weak spot. It is the identical with the greenback index total because it struggled in each 2016 and 2020 however in any other case has risen in yearly since 2010.
That speaks to the artwork of seasonal buying and selling in a month that is notable for just a few causes.
1) The golden development
I’ve written about this perpetually and it is come by means of numerous occasions. There is a very robust seasonal development of power for gold in Dec/Jan. Just lately, it has been preceded by weak spot in November that is became a shopping for alternative. Given the inflationary considerations in markets and sudden volatility in bonds, I do not see why this yr needs to be any completely different. Look to purchase a dip in mid-to-late November.
2) Inventory market power
One of the crucial well-known seasonals is that shares in every single place are inclined to do effectively in November. Listed here are the 20-year averages in varied indexes:
- MSCI world +1.71%
- S&P 500 +1.25%
- Nasdaq +2.81%
- Nikkei 225 +2.04%
Of these, I like Japanese shares the very best on a catch up commerce. They’re additionally using a nine-year successful streak in November and the power in Tokyo persistently runs by means of December. Although when you’re lengthy, you may need to hedge the FX publicity.
One exception (sorry UK merchants) is the FTSE 100, which averages a 0.19% decline. Although I might additionally be aware that final November, the 12.33% acquire was the very best of any single month over the previous 20 years.
3) Yen weak spot
November is the worst month for the yen by far, more-than doubling the subsequent worst month (Feb) over the previous 20 years. Arguably, the development began early this yr with the yen taking a beating. By the identical token, the development in each yen cross is now decidedly increased and we have seen some late-month consolidation. The technicals, seasonals and fundamentals are properly aligned on this commerce (which in fact means it can blow up within the different path).
4) Final gasp for US pure gasoline
There’s some minor seasonal power in pure gasoline however I might be cautious as a result of it is also a unstable month. The Dec-Feb interval is decidedly detrimental for gasoline so any additional rise shall be time to get out of the way in which. There was an enormous acquire in September however October was really decrease so a number of the air is out already. Final week alone European benchmark gasoline costs fell 30%. My most popular technique is to attend for the primary blast of chilly climate in New York and promote that pop. A protracted, chilly winter might result in a super-spike in costs this yr however whether or not that occurs is anybody’s guess.
5) Oil weak spot
G20 leaders and the US are badgering OPEC+ to do extra to convey down costs. November can also be the worst month for WTI crude. The OPEC assembly is on Thursday and including greater than 400Kbpd might definitely upend the scorching run in crude and spark a retracement. Even with out that, oil is perhaps due for a pullback. However oil bulls do not despair, the Jan-April interval is extraordinarily robust.
6) CAD struggles
The oil commerce was most likely a clue. Not surprisingly, November is the worst month for the Canadian greenback. Friday’s GDP report was surprisingly weak and the market is already pricing in 4 hikes in 2022. I am a loonie bull but it surely hasn’t been capable of make headway on a hawkish BOC and 10-week rally in oil so possibly it is time to head to the sidelines.
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