Here's a little hint.
Yes, I may not have felt it but the dollar was actually the underperformer in May trading. Here's how the major currency bloc performed against the dollar during the month:
- EUR +1.7%
- Japanese Yen +0.3%
- British Pound +2.0%
- Swiss Franc +1.9%
- CAD +1.1%
- Australian Dollar +2.8%
- NZD +4.3%
Losses against the above see the dollar index snap a streak of four consecutive monthly gains to start the year.
This is due to a bit of a pullback, but also with traders moving to consider the possibility of two rate cuts by the Fed around mid-May. But by then, the dollar has regained some modest ground as we return to the price with just one rate cut for the year. The odds show that traders are pricing in roughly 37 basis points of 2024 rate cuts currently.
So, what can we look forward to in June trading? Let's take a look at what seasonal patterns might suggest.
US Dollar Index Seasonal Pattern (Percentage Change)
This would normally indicate a slightly mixed month for the dollar but after a strong month of trading in May. Of course this is not the case this year because the factors affecting major currencies will also be very different in 2024. Spreads are fundamental and are strongly influenced by central bank forecasts and key economic data.
So, it may be difficult to make any seasonal correlation to how the dollar will perform this month.
Monthly seasonal pattern of EUR (percentage change)
The euro currency typically mirrors the dollar index in several ways. But with the European Central Bank set to cut interest rates later this week, it is one of the more interesting currencies to pay attention to. The seasonal pattern does not indicate much again in this case.
The ECB's decision on Thursday and language guidance afterwards will be key to setting the tone for the single currency. However, I don't expect much change in the latter. Policymakers will continue to point to the reliance on data and highlight the need to wait for more data before understanding what to do next.
Monthly seasonal pattern of the Swiss franc (percentage change)
However, the prominent seasonal pattern between the USD pairs should shift to USD/CHF. In the past 20 years, this has been the second-worst month for the pair, and it has fallen in 15 of the 20 months since last June.
The pair is hovering near the support around the 0.9000 level currently, and a strong break below it could trigger the next bearish wave to start the new month. Further support is then seen from the key daily moving averages at 0.8923-28 currently.