- Instrument: U.S. Dollar Index (DXY)
- Average Pattern Move: +1.33%
- Timeframe: May 1 – May 25
- Winning Percentage: 66.67%
Dear Investor,
You may not realize it, but the U.S. Dollar Index seasonals typically rallies into late May, with a solid history of gains during this period. However, the current macro landscape could complicate this seasonal tendency. As trade war headlines escalate, and confidence in the U.S. policy direction begins to waver, we want to analyze the data in more detail.
The chart below shows you the typical development of the U.S. Dollar Index from May 1 to May 25 over the past 15 years. During this window, the dollar has posted an average return of +1.33%, with a +22.15% annualized return and a 66.67% win rate. That’s a historically supportive backdrop, especially during a season where risk-off flows have often favored USD.
But this year, things may be different. According to Deutsche Bank’s George Saravelos, we are witnessing a “dramatic regime change in markets,” with growing risk that the dollar could face a broader confidence crisis. The trigger? A fear that Trump’s new wave of tariffs may prompt global investors to unwind USD-denominated assets accumulated over the past decade.
The implications are stark: a dollar that usually benefits from safe-haven flows in times of uncertainty could instead become the focus of investor concern. This risk dynamic, paired with renewed expectations for Fed rate cuts, is already hitting the greenback hard, sending the Dollar lower. However, markets do not move in a straight line and could this seasonal tendency be supportive of a broader dollar pull back?
Technical Perspective
From a technical standpoint there is a major monthly support around 96 and 100 around the 100 and 200EMA. Bounces from these areas are not unreasonable from a technical perspective.
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Trade Risks:
The major risk to this seasonal trend is the shifting sentiment around U.S. policy credibility and ongoing tariff negotiations.
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