ForexSpace.com - Newbie forex traders and top forex brokers alike will be well aware of that old bit of Wall Street folk wisdom that advises to Sell In May Then Go Away. As adages go, this one is often on the button, invoking investors to leave stocks right where they are this time of the year - the traditional period for Spring dipping - and sit the intervening months on some far away sandy beach until early winter. 

But it doesn’t always hold true. As Standard & Poor's strategist Sam Stovall warns, knee-jerk responses to the slogan could lead to costly mistake. Selling could mean wasting money on brokerage commissions and taxes, plus struggling to find a place to park the money. Stovall also believes investors are especially jittery now, not least because the past two years demonstrated perfectly how early in 2010 and 21011, Q1 economic data was strong and spirits high. Then came indications of a slowing economy, and the stock market went from bad to worse in the summer, a sorry state of affairs that ended up stretching right through to late autumn.

Nonetheless, as cutesy and indeed fallible as the Sell In May adage may seem, this year, perhaps, its rationale might just prove to have added gravitas; there are, after all, reasons for optimism this spring. For instance, Europe's stock markets have posted early gains as traders get back to work after their May Day breaks. The German DAX and the French CAC are both up around 1.5 percent, with the Spanish IBEX and Italian FTSE MIB gaining around 0.5 percent. Even so, May Day - which has only limited market participation - has not curtailed the odd surprise. The Reserve Bank of Australia kicked it off the celebration with a 50 bp rate cut. And despite the firmer tone to risk appetite, the USD index moved higher tracking the move in US Treasury yields. Indeed, as currency markets guru Marc Chandler points out, “the USD’s reaction was actually opposite to what would be expected given the rally in risk assets but its move clearly reflects the growing influence of yields.”

Additionally, the surprisingly robust April ISM manufacturing survey following the disappointing Chicago PMI for the same month highlights how the recovery, such as it is, is by no means straightforward, suggesting that USD gains will also be prone to the odd knockback. As Chandler says: “March factory orders are on tap today but the bigger focus will be on the April ADP jobs report, which will give important clues to Friday’s payrolls data. Expectations centre on a 170k outcome for the ADP report, a smaller increase than the 209k registered in March. In the meantime I expect the USD to hold its gains.”

As we noted at the start of the week, eurodollar was poised to edge higher despite the bad economic news emerging from the region. The pair has continued to strengthen over recent weeks, despite the release of data showing euro zone economic underperformance relative to the US. A case in point is the April euro zone purchasing manager’s data released today, which revealed further weakness, especially in peripheral countries. Some easing in peripheral bond yields has helped to support sentiment for the single currency, leading to its further short covering, but further gains are expected to be limited. EUR/USD now sits around the middle of its 1.30-1.35 range, but further upside will be restricted ahead of the key US jobs data this coming Friday.

Anyway, we'll soon see if the latest economic data from the euro zone knocks the markets. As Michael Hewson of CMC predicted this morning: “The one positive is likely to be German unemployment data which has run contrary to the rest of Europe's unemployment data for months now, slipping as it has to post reunification lows of 6.7 percent. Another drop is expected in April with a drop of 10k expected,” opines Hewson.

There, the good news is expected to end, not least thanks to euro zone unemployment, which is looks to rise inexorably; the March figure having already leapt to 10.9 percent.

Currently, the main fillip comes in the form of the Japanese yen, now performing hands down against it G10 currency counterparts in April, gaining about 3.3 percent against the dollar and 4.2 percent against the euro. It appeared to start the new month on a strong note, with greenback slipping to two month lows in early Asia.

Perhaps, for the wider European scenario, we should look at a new maxim of sell in June, don’t come back anytime soon!

Drew Hillier. Editor