The beauty of seasonal moves in the financial markets is that sometimes they are caused by a very practical reason. The dollar index is a great example.

Around the end of the year, the Dollar Index has consistently fallen only to rise sharply higher into January. Why? It is to do with taxation movements of USD’s from parent US companies to daughter companies outside of the US. Once the year-end has passed – all the exiting USD’s are sent right back. So, we have a whipsaw in the USD around the turn of the year.

Over the last 50 years, the USD has fallen 34 times between December 24 and January 01. The average fall has been -0.54%. The largest gain was +2.42%. The largest loss was -3.25%. There is never any guarantee that this seasonal pattern will repeat again this year. However, it is very helpful to notice when these strong seasonal patterns are in place.

Major Trade Risks: The main risk to this seasonal pattern would be if there is some very hawkish monetary policy reason for further USD gains around the turn of the year.