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The month of April has been known to be a bad one for the USD in particular but will the same happen this year?
Or will the USD buying continue?
Today, I’m going to take you through the seasonal reports and what to expect for the month of April from the US Dollar Index.
Currency Heat Map
The yearly heatmap for the USD Index highlights that April is usually the worst performing month for the major currency. This also highlights the other currencies such as the GBP and AUD outperforming the USD.
April isn’t a great month for the US Dollar. Meanwhile, the GB Pound, AU Dollar, and CA Dollar are performing very well during this month.
That tells us that there could be a potential for the US Dollar to start falling through the month of April.
Strength and weakness
What are other factors that could suggest so? The strength and weakness chart for USD. The price is currently at the plus six area, which usually means that a reversal zone will be coming up.
At this point, I would wait for the market to show weakness. This allows us to jump on some US Dollar weakness trades.
To add further confluence, the strength meter shows that the USD is the strongest currency and is in an overbought area. We would like to see the strength of the USD moving lower to suggest that its strength is fading.
If we look at what happened to the end of December start of January, the market was very weak for the US Dollar, and we started to see this bottoming out, it started to curve up that first week of January or the second week into January.
US Dollar Index
The second week of January 2021 showed us that the market was bottoming out of the market. We had a rally up, came back down, retested a supply zone, and we’ve been shooting higher ever since.
The strength and weakness suggested that the market would likely rally to the upside.
The reason why we know there was a demand is because the market moved to the upside quite aggressively. Then, it came back down and we’ve been rallying up again.
Could we expect the same thing to happen this month? Where is the supply for the US Dollar? And where could we look for an opportunity?
Weekly timeframe
In the weekly timeframe, sellers started to step into the market.
Looking at the weekly timeframe, we can see that there was a selling activity from the previous highs. This weekly bearish candlestick would be an area for sellers to re-enter the market. If the market forms a bearish candle in this zone, look for an opportunity for the USD to follow the seasonal analysis.
If the market usually finds a top in April and the strength and weakness are showing us that the market is in a potential reversal zone, we may get an opportunity to start looking for US Dollar bearishness.
I would wait for the US Dollar to reach a certain level then reject it on a weekly time frame. If the market does that and gives us a nice bearish close, it suggests that the sellers are coming back to the market.
This could be an opportunity for the market to push lower. The fact that the weekly is downtrending is also nice. That could bring a pullback into an interesting level of resistance for a continuation of the overall weekly downtrend.
Keep your eye on this potential seasonal play and on the weekly timeframe. I think there’s more to go before we see that weakness come through. But, we’ll see what happens in the coming weeks.
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