As featured in the Commodity Trader’s Almanac 2013, [http://amzn.to/T2nCgU] in conjunction with our co-author John Person, [http://www.personsplanet.com/], the Euro historically tends to make a bottom around the third week of October; then we see a tendency for price gains against the U.S. dollar by yearend.
Many factors could be at play to explain this, such as U.S. corporations’ need to make fiscal year-end book adjustments as well as to make foreign payroll and bonuses. This year this trade could further benefit from what our friends at MrTopStep [http://mrtopstep.com] are calling The “We look like &$^%in’ idiots” trade: short the dollar index. [http://mrtopstep.com/2013/10/look-like-idiots-around-world-trade-debt-fight-dollar-index/]
The trade itself begins by going long on or about October 24 and holding until about January 2. Due to the expiration of the December futures contract, we ran the statistics using the March futures contract. Overall we have a 64.3% success rate with 9 wins and 5 losses. The best win was in 2000 with a $14,813 gain. From 2009 to 2011, European sovereign debt concerns trumped this seasonal tendency.
Almanac Investor subscribers were alerted to this trade setup on October 8. On that day CurrencyShares Euro (FXE) was presented with a buy limit of $133.50. It was added to the Almanac Investor ETF Portfolio the next day and has been profitable since.