April forex seasons: So much to love, so much to trade

The new moon begins on Monday, and we can already be signs of what’s to come. There are strong seasonal trends in April, which creates a great backdrop for risky trades. A month that consistently delivers seasonal patterns that reflect the optimism of the coming of spring.

The arrival of positive seasonality at a time when the banking crisis has eased makes a strong argument to heed seasonality in 2023.

1) AUD/JPY strength

Best month for AUD/JPY and AUD/USD so take your pick. AUD/JPY gains have averaged 1.4% over the past 20 years, making it the best month for the pair. The recovery in commodity prices and the continuation of the recovery in the Chinese economy will be a good sign for this pair. Technically, a return to late February levels would require a 300 pips rally.

2) Cable gains

Over the last two decades, the GBP/USD pair rose 17x in April and boasted an average gain of 1.48% – more than triple the performance of the next best month (July). This strong pattern dominates the foreign exchange market, but be prepared to take profits towards the end of the month as the trend tends to reverse in May. Notably, this model failed to work last April, reminding us that even the strongest trends require risk management.

3) Any exchange, anywhere, all at the same time

Global stock markets generally perform very well in April. For example, the FTSE 100 has experienced only one drop in April over the past 10 years. Similarly, the MSCI world index has seen increases on the 9th of the last 10 April. Over the past 16 years, the S&P 500 has posted gains on April 14, excluding a 0.75% drop in 2012 and an 8% drop last year. The average increase of 2.53% marks the highest increase for any month.

4) Quarterly rally for oil

From April to June, oil is typically at its most prosperous. Over the last 20 years, the average earnings in April was 3.19%. In the two previous oil bull markets in 2008 and 2011, oil rose 11.7% and 6.8%, respectively. In the last two decades, oil rose 13 times in April and retracted 7 times. Last year, oil rallied in April, May and early June, peaking at just $123.68 and starting to bounce back to its current level of $74.29. Oil has fallen in 9 of the last 10 months.

5) USD/CAD losses

The US dollar generally softens in April with USD/CAD displaying one of the most obvious trends that can be attributed in part to the seasonal strength of oil, copper and equities. Over the last 20 years, the pair has experienced an average decline of 1.27% in April. Currently, USD/CAD is trading at 1.3518 after hitting a five-month high of 1.3861 earlier this month.