March was a month of wild market moves as risk trades were hammered on the start of the Ukrainian war only to stage an incredible rally in the final two weeks of the month.
We're now almost ready to turn the page on March and that will also mark the end of the Japanese fiscal year along with the start of the second quarter.
What to look for in April? There is a strong seasonal trend of strength in risk assets in the month and that's a hopeful sign that the recent rebound can continue. Of course, much will depend on what happens in Ukraine and in economic data, particularly on inflation.
Here is a look at a few trends.
1) AUD/JPY strength
Many of the seasonal patterns in April are the ones that have been working already and nothing has been working better than AUD/JPY. This pair has been a rocketship since the start of February and working on eight-week winning streak that's in jeopardy of being broken. I can certainly see the argument for waiting for a deeper dip before buying this pair, but there are good reasons why it has been rallying and April is easily the best month for this pair, averaging a 1.45% gain over the past 20 years -- by far the best of any month. It's also the best month for AUD/USD.
2)Stocks sizzle
There's a similar pattern around the world with stock markets universally cheering April. Only once in the past nine years has the FTSE 100 been lower in April. The MSCI world index is on a nine-year winning streak in April. In the past 16 years, the S&P 500 has made gains in April 15 times, with the lone miss a 0.75% decline in 2012. The average gain of 2.53% is the best on the calendar.
3) Cable climbs
In the past 20 years, GBP/USD has risen in April seventeen times. The average gain of 1.48% is more than triple the next best month (July) in that timeframe. The pattern is one of the strongest ones in all the FX market but be sure to take profits late in the month because the pattern reverses in May.
4) Oil heats up for a three-month run
The three-month period of April-June is the best time of year to own oil. The average gain in the past 20 years in April is 3.19%. The last two times we had a big bull market in oil (2008 and 2011, respectively) oil gained 11.7% and 6.8%, respectively. In the past 20 years, oil has risen 13 times in April and declined 7 times.
5) USD/CAD down
The US dollar is generally soft in April but one of the strongest trends is in USD/CAD, which shouldn't be a surprise given the seasonal strength in oil, copper and stocks. The pair has slumped late in March but expect more to come with an average decline of 1.27% i nthe past two decades. The pair is currently flirting with the lows of the year and if that breaks, it will open a path to 1.23.