Selling the euro was a winning trade
"Sell in May" always works...so long as you sell the right thing.
It started off as a quiet month but trouble in Italy made for a tumultuous finish. At the start of the month, we wrote about some of the seasonal trends in May. Let's see how they went.
1) May forex seasonals: Euro trip
"May is the worst month on the calendar for the euro," I wrote. May 2018 delivered once again. It exceeded the 10-year average of -1.95% with a whopping -3.56% drop against the US dollar and that includes a 1% rebound today. Selling on April 30 was a trade that was in the money the entire month.
2) May forex seasonals: From bad to worse for AUD/USD
May seasonal weakness came early for the Australian dollar. AUD/USD tumbled in the last two weeks of April to 0.7475 from 0.7775. That should have been a warning sing. The pair was oversold to start the month. Although the decline continued to 0.7412 in the second week of May, a back-and-forth rebound slowly emerged. With the 0.9% rally today, the pair is now up 0.5% in the month, with one day to go. Aussie capex data is still to come, so it's not over, but it certainly won't be a great trade.
3) Emerging markets May seasonals : take won profits when you have them
This one came from Giles and Bloomberg, who noted that May has been the worst month for emerging market currencies since 1999. That index is down 1.48% this month with only the Russian ruble up against the US dollar month-to-date. There were some major decliners, including the Argentine peso (-17.6%) and Turkish lira (-9.3%). Giles highlighted the South Korean won, which fell 1.2%.
4) Natty part 2
Back in early April, I highlighted that the April-May period was especially strong for natural gas. I really like the chart in this pair and I was long myself for the full stretch. The trade delivered a solid 7.3% two-month return that was dented by a 2.4% fall in the past two days.
Overall: The Aussie trade was a dud but not an expensive miss. The others were strong.
