Forex Seasonality – July 2024: GBP/USD Rally Potential Amid Summer Doldrums?

July Forex Seasonality Key Points

• Most of the major currencies have seen relatively middling returns through July, with one major exception.
• July has been the 3^rd strongest month for GBP/USD historically, and bulls will be pinning their hopes on a recovery rally this month after the June drop.

The beginning of a new month marks a good opportunity to review the seasonal patterns that have influenced the forex market over the 50+ years since the Bretton Woods system was dismantled in 1971, ushering in the modern foreign exchange market.

As always, these seasonal tendencies are just historical averages, and any individual month or year may vary from the historic average, so it’s important to complement these seasonal leans with alternative forms of analysis to create a long-term successful trading strategy. In other words, past performance is not indicative of future results.

Euro Forex Seasonality – EUR/USD Chart

Source: TradingView, StoneX. Please note that past performance is not necessarily indicative of future results.

Historically, July has been a modestly bullish month for EUR/USD, with an average return of +0.32% across the month over the last 50+ years. After a weak performance in June (-1.3% as of writing), EUR/USD bulls will be hoping that the world’s most widely-traded currency pair can get back on track as we move through the summer…and all traders will be hoping for some volatility in either direction to break the tight range dating back to the start of 2023.

British Pound Forex Seasonality – GBP/USD Chart

Source: TradingView, StoneX. Please note that past performance is not necessarily indicative of future results.

Looking at the above chart, GBP/USD has historically seen relatively strong performance in July, with average returns of around +0.45% since 1971. Cable did generally track with its bearish seasonality last June, and with two historically bearish months on tap after July, bulls will be pinning their hopes on a recovery rally this month.

Japanese Yen Forex Seasonality – USD/JPY Chart

Source: TradingView, StoneX. Please note that past performance is not necessarily indicative of future results.

July has historically been a bearish month for USD/JPY, with the pair falling by an average of -0.25% in July since the Bretton Woods agreement. That said, the fundamental dynamics around the persistent depreciation in the yen (rise in USD/JPY) and the potential for intervention from Japanese policymakers leave me putting less stock in the historical trends in the current environment.

Australian Dollar Forex Seasonality – AUD/USD Chart

Source: TradingView, StoneX. Please note that past performance is not necessarily indicative of future results.

Turning our attention Down Under, AUD/USD has seen historically quiet returns in July, with an average decline of -0.2% across the month, its smallest net range of all months. Of course, it’s worth noting that these moves only highlight the beginning-to-end net movement in a currency pair, potentially masking the intra-month volatility, which could come into focus as the RBA prepares to buck the global trend with a potential interest rate hike in the second half of the year.

Canadian Dollar Forex Seasonality – USD/CAD Chart

Source: TradingView, StoneX. Please note that past performance is not necessarily indicative of future results.

Last but not least, July has been a miidle-of-the-road month for USD/CAD going back to 1971, with an average historical return of +0.09%. Traders will have a much better view on whether USD/CAD can break out of its well-trodden 1.3200-1.3900 range after the release of the dueling US and Canadian jobs report at the end of next week, which could potentially set the tone for the pair throughout the rest of the month.

As always, we want to close this article by reminding readers that seasonal tendencies are not gospel – even if they’ve tracked relatively closely so far this year – so it’s important to complement this analysis with an examination of the current fundamental and technical backdrops for the major currency pairs.-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX