Forex Seasonality – December 2024: Can EUR/USD and AUD/USD Rally?
December Forex Seasonality Key Points
- EUR/USD and AUD/USD are heading into their strongest month, hinting at rally potential.
- Meanwhile, December is the most bearish month of the year for USD/JPY, and it’s carrying bearish short-0term momentum into the month.
- GBP/USD’s historic bullish tendency remains in effect above 1.23-24 support
The beginning of a new month marks a good opportunity to review the seasonal patterns that have influenced the forex market over the 50+ years since the Bretton Woods system was dismantled in 1971, ushering in the modern foreign exchange market.
As always, these seasonal tendencies are just historical averages, and any individual month or year may vary from the historic average, so it’s important to complement these seasonal leans with alternative forms of analysis to create a long-term successful trading strategy. In other words, past performance is not indicative of future results.
Euro Forex Seasonality – EUR/USD Chart
Source: TradingView, StoneX. Please note that past performance is not necessarily indicative of future results.
Historically, December has been the most bullish month for EUR/USD, with the world’s most widely-traded currency pair sporting an average return of 1.23% over the last 50+ years. In November, EUR/USD dropped sharply through to hit a 2-year low in November leaving the pair at/near “oversold” levels across most medium- or longer-term timeframes. For this month, the 50% retracement of the 2022-2023 rally near 1.0400 will be the key level to watch, with a break below it hinting at the potential for more downside despite the bullish seasonal tendency.
British Pound Forex Seasonality – GBP/USD Chart
Source: TradingView, StoneX. Please note that past performance is not necessarily indicative of future results.
Looking at the above chart, GBP/USD has historically seen bullish price action in December, with average returns of around +0.49% since 1971. The British pound also fell victim to the relentless US dollar strength last month, slipping by nearly -3% to trade around 1.2500 as of writing. As long as it remains above the 2024 lows in the 1.2300-1.2400 zone, the potential for a rally remains intact.
Japanese Yen Forex Seasonality – USD/JPY Chart
Source: TradingView, StoneX. Please note that past performance is not necessarily indicative of future results.
December has historically been a bearish month for USD/JPY, with the pair falling by an average of -0.61% since the Bretton Woods agreement, by far the worst average performance of any single month over the last half century+. The pair flashed higher in early November before fading back later in the month, leaving it near unchanged, albeit with potentially bearish momentum heading into the bearish seasonal period.
Australian Dollar Forex Seasonality – AUD/USD Chart
Source: TradingView, StoneX. Please note that past performance is not necessarily indicative of future results.
Turning our attention Down Under, AUD/USD has seen historically strongly bullish returns in December, with an average gain of 0.66% across the month. Last month, AUD/USD edged lower in-line with its seasonal tendency, settling near the middle of its 2024 range. With no obvious near-term technical bias, bulls will be hoping the bullish seasonality drives prices back to the upper-0.6000s heading into the new year.
Canadian Dollar Forex Seasonality – USD/CAD Chart
Source: TradingView, StoneX. Please note that past performance is not necessarily indicative of future results.
Last but not least, December has been a modestly bearish month for USD/CAD going back to 1971, with an average historical return of -0.02%. The North American pair peeked out to a 4.5-year high in November before reversing back toward 1.40 as of writing, so if we don’t see a new bullish catalyst emerge, a pause or minor pullback would make sense.
As always, we want to close this article by reminding readers that seasonal tendencies are not gospel – even if they’ve tracked relatively closely so far this year – so it’s important to complement this analysis with an examination of the current fundamental and technical backdrops for the major currency pairs.
-- Written by Matt Weller, Global Head of Research
Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.
ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.
City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.
The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.
The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.
The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
© City Index 2024