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[Oluti]

Seasonality, for trading purposes, is the tendency of a tradable to rally or decline at certain times of the year. Knowing the high probability seasonal trends can provide a context for other forms of analysis, and can also aid in entering and exiting positions at likely turning points.

So how do we find Dollar Index seasonal trend(s)?
And what are the commonly occurring Dollar Index seasonal trends?
There are seasonal patterns within the Dollar Index, and those will be disclosed shortly. First, let’s look at what seasonal trends are and how we find them.

Finding Seasonal Trends

By default most charts are set up to show the price history of a currency, stock or futures contract in chronological order–one day follows another and 2012 follows 2011 which follows 2010 and so on. The charts shows the price moving through time, from the past to the current. This is not the only way to look at a chart though, in fact there are many ways, and seasonal charts are one of those other ways.

Instead of looking at the last 30 years of Dollar Index price data in chronological order, what if you took each year (January to December) and could put each year on top of each other. All 30 years are then averaged and set to an initial value of 100 to provide one line which shows how the currency acts on average between January and December, over the last 30 years (below we will look at the 5, 10, 15, 20 and 30 year averages).

Will the average show Dollar Index seasonal trends where it generally turns higher in certain months, or turns lower in others?


Dollar Index Seasonal Trends – 5,10,15 Year

The first time frames looked at are the 5,10 and 15 year seasonal trends. Why look at all three and not just one average? As you will see each average is slightly (or significantly) different. Therefore, we are only looking for common points where all three time frames bottom or top at similar times of the year. By looking at multiple time frames, and finding commonalities, we can extract the strongest Dollar Index seasonal trends.



5/10/15 Year DX Seasonality Study
Source: Signal Financial Group
Over the three time frames studied we can extract the commonalities to find usual tendencies in the USD over the last 5, 10 and 15 years:

Start of the year to mid-February has an upward bias.
Typically tops out in the middle of February and declines into mid-March.
Last half of March is usually strong and then sells off into late April.
Beginning to middle of May is a strong time for the USD, but then falls into a short-term low by the end of May.
End of May to Mid-June may see some price appreciation.
Middle of June usually marks a short-term high and the USD declines into the end of July.
Rally from beginning of August to early September.
Early November to late-November sees a rise.
Late December is a bearish time.
Dollar Index Seasonal Trends – 20 and 30 Year
The 5, 10 and 15 Dollar Index seasonal trends data above is useful, but by looking at a longer term time-frame we can erase some of the noise which is seen on the shorter time-frames above. Here we will look at the Dollar Index seasonal trends which occur on the 20 and 30 year time-frames.
USD Seasonal Chart – 20 and 30 Year



20/30 Year DX Seasonality Study


January to late-February is generally a bullish time.
Early March to mid-March is bearish.
There is normally a short rally from mid-March to late-March.
Late March to early May is bearish time.
Mid-June is often a high point followed by a decline into the end of July.
Early August to mid-August usually sees a bit of a rise.
Mid-August and mid-September mark short-term highs followed by declines into the end of September.
Mid-November to late November can be a bullish time.
December is a bearish month.
Dollar Index Seasonal Trends – Dominant Trends

In our final step we will we will extract the common patterns from all time frames to provide the most reliable seasonal patterns…which have been present in the 5, 10, 15, 20 and 30 year seasonal trends.

Start of the year to mid-February is usually bullish.
Early March to mid-March is bearish.
Last half of March sees prices rise.
Late March to late April is a bearish time.
Middle of June usually marks a short-term high and the USD declines into the end of July.
Early August to mid-August is a bullish time.
Mid-November to late November often sees a rise.
Late December is a bearish time.

Seasonal Trends – Final Notes

Seasonality is an average, not a rule. In any given year price can deviate from the seasonal tendency and traders shouldn’t fight it.

Seasonality is not a tool to use on its own, but rather should be combined with price pattern analysis to determine entry and exit points. Yet seasonality does provide us with windows of time where we can watch for trend reversals and feel more confident if we see a price pattern that indicates a reversal during that time.

It is important to keep the overall trend of the market in mind. In up trends use seasonal low points to buy. In overall down trends, use seasonal high points to get short or to sell.

 

[lioralace]

Alright, let’s cut the fluff—seasonality in trading is basically that weird superpower most folks shove to the back of the toolbox, but honestly, it can give you a real leg up trading the Dollar Index (DX). At the end of the day, it’s about spotting when that sucker likes to go up or down, just because of what month or season it is. Wall Street’s basically got its own version of Groundhog Day, and—surprise, surprise—the dollar falls into a routine like the rest of us.

So, where do you even start with this? You don’t look at price charts linearly, stacking up day after day or year after year like a normal financial nerd. Instead, you stack up each year on top of each other—like you’re building some weird financial lasagna—to get a kind of “average year” for the Dollar Index. Take thirty years' worth of data, smash ‘em together, smooth out the noise, and you’ll spot those repeating patterns that markets swear are totally random. (Yeah, right.)

Different time frames tell different stories—check out the last five years, then the last ten, then fifteen, twenty, thirty... You get the idea. Shorter frames pick up on what’s fresh or trendy; longer stretches filter out the drama and show you the “greatest hits” of the dollar’s seasonal moves. If things line up across several time frames? Okay, now you’re onto something.

What do the data say? Well, let’s break it down:
– The year blasts off strong—DX is usually running hot from January up through Valentine’s.
– Things top out sometime in February, then the dollar usually chills (read: drops) into mid-March.
– Late March? Surprise comeback. But don't get comfy. From there into late April, things fizz out again.
– May’s a mess—starts strong, but by the end? Meh. Short-term dip alert.
– June comes in swinging, like, “Remember me?” with a mid-month high before tanking into July.
– August and early September? Bulls take the wheel.
– Late November? Another shot of adrenaline, dollar-style.
– And, okay, December... not pretty. Usually sliding into the new year.

Now, zoom out—look at 20- and 30-year charts. There’s even more clarity, if you can believe it. Jan to late Feb? Green lights. March? Rocky. June’s a pit stop at the top, just before the summer slump. End of year is messy, but December’s generally bad news for the buck.

If you mash all this together, the key dates sorta pop out: solid runs in winter, another push around June, bullish bursts in August and November, then a sad little finish in December.

But—and this one's important, like underlined-three-times important—seasonality is not some magic cheat code. Markets love to throw curveballs (wars, pandemics, central bankers with itchy trigger fingers...) that make those patterns go right out the window. So, yeah, don’t just follow the calendar blindly. Layer this whole “seasonal” thing with your usual bag of tricks: price action, indicators, economic tea leaves... you know the drill. If you happen to spot a reversal pattern smack in the middle of a seasonal low? Jackpot. Don’t ignore the broader market trends either—if the general vibe is “up,” then those seasonal dips might be just what you need to jump in. If the market’s tanking? Maybe wait until the next seasonal high to short your heart out.

Long story short: seasonality for the Dollar Index isn’t gospel, but it can nudge your trading in the right direction. Use it as a bonus filter, not your North Star, and you’ll probably find yourself making better calls—or at least avoiding some classic rookie mistakes.