A Plethora of Headaches

We hope the recent market turmoil is not giving our readers too much of a headache. As you are no doubt aware, the events of the last few weeks have made maneuvering around global markets rather difficult.

 

A less than happy NYSE floor trader [PT]

Photo crdit: Brendan McDermit

 

The US faces uncertain economic times, as Trump and Xi Jinping remain locked in a bitter trade dispute that is likely to go on for some time, creating uncertainty for the future of economic relations between the world’s two biggest economic powerhouses [ed note: over the weekend news emerged that Trump and Xi agreed on a truce and no further escalation in the dispute should be expected for the time being, but it remains to be seen whether the hatchet will remain buried for good].

On the other side of the Atlantic, Brexit is still not off table – on the contrary, it has proved to be an endless saga which has been in the media spotlight for almost two and a half years now. On top of that, Italy’s budget drama is giving the markets the jitters, as is the latest confrontation between Russia and the Ukraine.

The USD is rallying strongly against this backdrop, which is contrary to its typical behavior at this time of the year. What should one make of this development? Will the US dollar continue to appreciate, or will its usual pattern of a seasonal decline at the end of the year prevail?

 

The Euro Typically Rallies at the End of the Year and Falls Again Immediately Thereafter

The chart below illustrates the seasonal trend of the euro relative to the US dollar. It is not the type of price chart one usually encounters. Rather, the seasonal chart depicts the average trend in the euro in the course of a calendar year.

The horizontal axis shows the time of the year, the vertical axis the average percentage move in in the exchange rate over the past 43 years. In this way the seasonal trends of the euro can be discerned at a glance.

 

Euro vs. US dollar, seasonal trend over the past 43 years. A strong seasonal uptrend in the euro is in evidence at the end of the year.

 

The period of seasonal strength in the euro at year-end is highlighted in blue. This phase begins on November 27 and ends on December 31.

Thereafter the euro typically declines again. If you look closely at the chart, you will notice that the change in trend occurs precisely at the turn of the year. This is quite conspicuous and there has to be a reason for it – more on this further below.

 

Strength in the Euro at the End of the Year is no Coincidence

The average gain in the seasonally strong period between November 27 and December 31 amounts to 1.24 percentage points – quite a sizable amount, as currencies tend to be far less volatile than e.g. stocks.

The following bar chart shows the percentage moves in the exchange rate in the period November 27 – December 31 for every year since 1975.

 

Euro vs US dollar: percentage return between 11/27 and 12/31 for every year since 1975. The euro typically rallies at year-end.

 

The green bars indicate gains. They predominate both in terms of size and frequency. This makes clear that the euro’s seasonal rally at the end of the year  is not generated by a handful of statistical outliers. What is the reason for the euro’s strength at this time of the year though?

 

What Drives the Euro’s Seasonal Rally at the End of the Year

The fact that the euro turns down vs. the US dollar again, right at the turn of the year already hints at the likely cause of this seasonal pattern. It has to be directly linked to the calendar. And what happens at year-end? It is the balance sheet date!

The euro’s year-end rally inter alia has to do with US tax legislation. Many US companies are able to reduce their tax liability by understating certain financial figures as much as possible at the reporting date. In this context it can be worthwhile to transfer funds to the accounts of foreign subsidiaries.

The associated increase in demand for the euro naturally has an effect on its exchange rate. Therefore,  the euro typically strengthens against the dollar late in the year.

After the turn of the year, the tide immediately turns again as companies reverse these transfers of funds. The typical move in the euro’s exchange rate against the US dollar is therefore primarily a result of tax avoidance strategies practiced by US companies.

What is the effect on other currencies though? Find out more about this in our web-based application.

 

Make Use of These Patterns!

With the help of the Seasonax Web App, you can examine such patterns – using nothing more than your browser. You can analyze more than 12,000 assets and find seasonal patterns of your own. We invite you to visit  app.seasonax.com and test out the patterns we offer for free.

There are no guarantees in the markets, but you can certainly let probabilities work in your favor!

 

Dimitri Speck specializes in pattern recognition and trading systems development. He is the founder of Seasonax, the company which created the Seasonax app for the Bloomberg and Thomson-Reuters systems. He also publishes the website www.SeasonalCharts.com , which features selected seasonal charts for interested investors free of charge. In his book The Gold Cartel (published by Palgrave Macmillan), Dimitri provides a unique perspective on the history of gold price manipulation, government intervention in markets and the vast credit excesses of recent decades. His ground-breaking work on intraday patterns in gold prices was inter alia used by financial supervisors to gather evidence on the manipulation of the now defunct gold and silver fix in London. His Stay-C commodities trading strategy won several awards in Europe; it was the best-performing quantitative commodities fund ever listed on a German exchange.

You can find an introduction to the Seasonax app and in-depth information on what it can do here. Furthermore, here is a complementary page on the web-based Seasonax app, which costs less and offers slightly different functionality (note: subscriptions through Acting Man qualify for special discounts – for both the Bloomberg/Reuters and the web-based versions of the app. Details are available on request – simply write a note to info@acting-man.com with the header Seasonax!).

 

Charts by: app.seasonax.com

 

Image caption & editing by PT

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • A Golden Renaissance – Precious Metals Supply & Demand
      Battles for Civilization A major theme of my work — and raison d’etre of Monetary Metals — is fighting to prevent collapse. Civilization is under assault on all fronts.   Battling the barbarians at the gate... [PT]   There is the freedom of speech battle, with the forces of darkness advancing all over. For example, in Pakistan, there are killings of journalists. Saudi Arabia apparently had journalist Khashoggi killed. New Zealand now can force travelers to...
  • A Global Dearth of Liquidity
      Worldwide Liquidity Drought - Money Supply Growth Slows Everywhere This is a brief update on money supply growth trends in the most important currency areas outside the US (namely the euro area, Japan and China)  as announced in in our recent update on US money supply growth (see “Federal Punch Bowl Removal Agency” for the details).   Nobody likes a drought. This collage illustrates why.   The liquidity drought is not confined to the US – it is fair to...
  • The Federal Punch Bowl Removal Agency
      US Money Supply and Credit Growth Continue to Slow Down Not to belabor the obvious too much, but in light of the recent sharp rebound, the stock market “panic window” is almost certainly closed for this year.* It was interesting that an admission by Mr. Powell that the central planners have not the foggiest idea about the future which their policy is aiming to influence was taken as an “excuse” to drive up stock prices. Powell's speech was regarded as dovish. If it actually was,...
  • The Zealous Pursuit of State Sponsored Wealth Destruction
      How to Blow $9 Billion The life cycle of capital follows a wide-ranging succession. It is imagined, produced, consumed, and destroyed. How exactly this all takes place involves varying and infinite undulations.   The Stroh Brewery in Detroit. The company provided an example of how wealth that has been accumulated over generations can be completely destroyed due to just a handful of really bad decisions. [PT]   One generation may produce wealth, while the...
  • Debt, Death, and the US Empire
      Yosemite Sam Gets Worried About Federal Debt In a talk which garnered little attention, one of the Deep State’s prime operatives, National Security Advisor John Bolton, cautioned of the enormous and escalating US debt.   Deep State operative John Bolton, a.k.a. Yosemite Sam [PT] Photo credit: Mark Wilson / Getty Images   Speaking before the Alexander Hamilton Society, Bolton warned that current US debt levels and public obligations posed an “economic...
  • The Bien Pensants Agree: The World Doesn’t Need Gold – Precious Metals Supply and Demand
      The Last Thing to be Left Standing – Alas, Not Yet  The price of gold was about unchanged this week, whereas that of silver fell another nine cents. All Serious Right Thinking people agree that the world does not need gold. Indeed our monetary system produces Great Moderations that are totally unlike the incredible volatility of the gold standard era. They wish they could kill all memory of gold as money.   Ben Bernanke, the inventor of the “Great Moderation” fairy tale,...
  • How To Give Thanks Like Socrates
      Political Correctness Indoctrination [ed note: we are posting this belatedly as it was originally supposed to be published on Thanksgiving Day. Unfortunately your editor was out of commission... but MN Gordon's article is still worth reading. - PT]  Ordinary ideals of Americana range as far and wide as the North American continent.  The valued conviction of one American vastly differs from that of another.  For example, someone from the Mid-Atlantic may have little connection...
  • Paper Lanterns
      Mud Volcanoes There are numerous explanations for just what in the heck is going on with the economy.  Some are good.  Many are bad.  Today we’ll do our part to bring clarity to disorder...   Two data series it is worth paying attention to at the moment: the unemployment rate (U3) and initial claims. As the chart at the top shows, when the former makes a low it is time to worry about the economy. Low points in the U3 UE rate slightly lead the beginning of recessions....
  • Trump or Seasonality: Which One is Going to Prevail in the Dollar's Late Year Surge?
      A Plethora of Headaches We hope the recent market turmoil is not giving our readers too much of a headache. As you are no doubt aware, the events of the last few weeks have made maneuvering around global markets rather difficult.   A less than happy NYSE floor trader [PT] Photo crdit: Brendan McDermit   The US faces uncertain economic times, as Trump and Xi Jinping remain locked in a bitter trade dispute that is likely to go on for some time, creating uncertainty...
  • Where is the PPT? Precious Metals Supply and Demand
      A Rocky Road The price of gold rose $26, and the price of silver rose $0.44. And bitcoin fell $560. Somebody should look into if the Fed and the Plunge Protection Team and the Bitcoin Banks are in cahoots to sell bitcoin naked-short...   No PPT for Bitcoin – after breaking a long-standing lateral support level, the cryptocurrency went into free-fall. You may notice the little remark in the annotation at the top of the chart: we believe BTC is highly likely to continue to...
  • The Big Picture: Paper Money vs. Gold
      Numbers from Bizarro-World The past few months have been really challenging for anyone invested in gold or silver; for me personally as well. Despite serious warning signs in the economy, staggering debt levels and a multitude of significant geopolitical threats at play, the rally in risk assets seemed to continue unabated.   Bizarro-World intrudes into our reality, courtesy of central banks. [PT]   In fact, I was struggling with this seeming paradox myself. As I...

Support Acting Man

Item Guides

Austrian Theory and Investment

j9TJzzN

The Review Insider

Archive

Dog Blow

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!