Seasonality | NVDA | Rumpelstiltskin

EUR into year-end

I was looking at FX seasonality from now until year end, with a particular focus on EURUSD. Any chart of the seasonals of DXY or EURUSD shows a dramatic bullish EURUSD bias, and I was wondering if it’s a USD thing or a EUR thing. It’s mostly a EUR thing. I also wanted to know if it was driven by huge outliers like 2008. It is not. 18 of the last 24 years, EURUSD went up between 21NOV and 31DEC.

So even if you exclude the outliers, the chart looks pretty much identical. Here it is excluding the 2000 eruption, the GFC and the Eurozone crisis, all years where EURUSD saw outlier year end moves.

The shape of the chart if you include those years is virtually identical. Given 2016 is a bit of a comp for 2024 (both are Trump election victory years), it’s worth mentioning that EURUSD did not bottom until mid-December in 2016.

The same levels were in play in 2016 and today as you see in the second chart. EURUSD has dropped from 1.12 to 1.05 since October 1, 2024, and it dropped from 1.12 to 1.04 in NOV/DEC 2016. There is nothing new under the sun.

Looking at other currencies, you see much less of a dramatic pattern, with GBPUSD still bullish but pairs like USDCAD, USDJPY, and AUDUSD more all over the place or even showing a bias for a modestly stronger USD.

Here are a few indicative charts:

As I have often said, seasonality is just one of many inputs into a trading process. But here’s the info and you can do with it what you will. With positioning and seasonality both pointing the wrong way for EURUSD shorts, but macro pointing pretty hard the right way, still… I remain in the consolidation camp as outlined on November 13 in am/FX: EURUSD shorts will be less fun.

Zooming out, I am becoming more and more convinced that January is a binary moment for the USD. Base case has to be large tariffs of some sort on Day One, along with the potential for other surprises like a serious, military-led effort to deport illegal immigrants. Every Trump nomination points away from the status quo and towards radical and experimental policy changes.

The reason the USD distribution is binary or bimodal is that some of what I have just described is priced in, but it’s impossible for markets to fully price it in advance. The market is mega long USD (and max long equities) but if huge tariffs come on Day One, there will still be more USD to buy. That is, either huge policy changes come, or they don’t. Either way the USD is going to move a lot. If you can figure out a way to own January vol without owning too much December vol… That’s the way.

This is especially true in USDCNH, where the pair is being held down by the PBoC in anticipation of the potential need to weaken the currency aggressively to offset Day One Tariffs. We are in a temporary, non-equilibrium state here in USDCNH. Either tariffs come on Day One and PBoC takes their foot off the underwater beachball, or we get a redux of 2017 as the US administration slow plays tariffs as a negotiation ploy with trading partners and the PBoC squeezes funding to punish foreign speculators and USDCNH plummets. It’s bimodal ~7.00 or ~7.50,

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NVDA

I don’t have much to say about NVDA, but one pattern I have noticed is that the runup trade skews the risk/reward. In other words, if it rips into earnings, the post-earnings reaction skews a bit weak, and vice versa. NVDA is up just 1% in the past 6 days so you can add or subtract whatever it does from now until 4 p.m. to figure out where we end up on this chart. Obviously, it doesn’t seem like it’s going to be a big signal, but the chart is informative as I find many things, including FX, observe this pattern. It makes sense. The run up tells you the direction of frantic last-minute positioning into the event.

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Final Thoughts

Not sure if you heard, but a man in Tysons Corner, Virginia has unlocked the infinite money glitch. You have a stock that holds just one asset and that stock trades at 3X the value of the asset. You issue stock and buy more of the asset and the asset goes up. You issue more stock and buy more of the asset and the stock and the asset both go up. Forever!

Chat-GPT: Please write a fantastical story about financial engineering. Incorporate elements of Bunker Hunt, Bill Hwang, and Rumpelstiltskin[1].

Have yourself a golden day.

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[1] Without the firstborn child as collateral.

https://informationisbeautiful.net/visualizations/world-population/

good luck ⇅ be nimble