US Dollar Index Seasonality – Best Times to Buy and Sell

Learn the times of the year when the US Dollar Index tends to do well and poorly, based on historical tendency.
Updated: Sep 26, 2022
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Normally we look at charts in chronological order, day after day and year after year. These typical chart types show the price path of an asset or index over days, weeks, months, or years and provide a lot of information for technicians to use. Yet there is another way to view charts, and that is to look at them in a seasonal fashion.

A seasonal chart shows the tendencies of an asset or index to move higher or lower, or peak and bottom, at certain points during the year.

Instead of looking at the last 15 years of index data in chronological order, what if we took each one year period, January to December, and printed it on a transparent slide. Then, put each year on top of each other. Doing this would highlight any period of the year that tends to be strong or weak. Luckily, we don’t need to do all that work. We can just take an average of the last 15 or 20 years to show what tends to occur at different times of the year (also see S&P 500 Seasonal Trends).

Below we look at the pattern of US Dollar Index futures which, which can also aid in trading US dollar related currency pairs.

US Dollar Seasonal Patterns

The US Dollar has seasonal tendencies, and we can see them by looking at the following seasonal chart.

US Dollar Index Futures Seasonal Chart- 15 and 33 Year

US Dollar Index Futures Seasonal Chart-

The chart shows the tendencies of the US Dollar Index over the last 15 and 33 years. Over these two time periods, while there are variations, overall the tendencies are quite similar.

  • Start of the year into early March has an upward bias. Although, over the last 15 years, the bias has been neutral (sideways) with only early January and mid-February to early March being strong.
  • By mid-March, the Index is often near a peak and starting to decline.
  • The index has a downward bias into the end of April, where it often bottoms in late April or early May.
  • May is often a strong month, seeing the price rise again.
  • June through early July is a choppy period. There is a slight upward bias but the price tends to whipsaw up and down a fair bit.
  • Early July usually sees the price peak and start a multi-month bearish period. The price is weak into mid-October.
  • Mid-October is a bottoming period of the US Dollar Index, and it is strong into mid-November.
  • In mid-November, another bearish period starts and lasts until the end of the year. Although, the first half of December tends to have an upward bias, followed by a downward bias into the end of the year.
  • The chart below provides a more general guideline of which months are bullish or bearish for the US Dollar Index. As noted above, some pretty big moves start early, in the middle, or late in a month, so the prior chart is more detailed in that regard.

The chart below provides other information. The number on the top of the column shows how often (%) the price moved higher in that month over the last 20 years. The number at the bottom of the column gives the average percentage rise or decline.

% of months USD closed higher than opened

While this chart is a more general version of the chart above, it essentially shows the same data, just in a different way.

Final Word on US Dollar Index Seasonality

Seasonality is an average, not a rule. In any given year price can deviate from the seasonal tendency and traders shouldn’t fight it. Alway manage risk on every trade.

Seasonality is not a tool to use on its own, but rather should be combined with price pattern analysis to determine entry and exit points. Yet seasonality does provide us with windows of time where we can watch for trend reversals or trends and feel more confident in our analysis.

It is important to keep the current trend of the market in mind. In uptrends use seasonal low points to buy. In overall downtrends, use seasonal high points to get short or to sell. Don’t fight the current trend just because the seasonal patterns say it should be going the other way. Seasonality supplements current price action analysis, it doesn’t replace it.

Using seasonality is not a requirement for successful trading, it is a tool swing traders may opt to use if they feel it helps them.

Sources & references
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