November Forex Seasonality Key Points
- December has historically been the most bullish month for EUR/USD, which is breaking out of a multi-month downtrend as of writing.
- USD/JPY has, on average, seen its worst performance in December.
- AUD/USD has been rangebound for seven straight months, but historical December strength raise hopes of a breakout.
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 necessarily 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 +1.2% over the last 50+ years. In November, EUR/USD edged higher in choppy trade, and as of writing on December 1st, the pair is peeking out above a near-term bearish trend line, providing a potential technical catalyst for the longer-term seasonal tendency. The release of US CPI and the FOMC’s final monetary policy decision of the year on December 10th will be a major catalyst for the pair.
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, on average, seen strong performance in December, with average returns of around +0.5% since 1971. Like the euro, the British pound traded higher in November to break out of a bearish channel, though it still remains below its 50-day EMA as of writing. If Cable can clear that resistance zone near 1.3300, a “Santa Rally” could be in store for the pair.
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 the most bearish month for USD/JPY, with the pair falling by an average of -0.6% since the Bretton Woods agreement. USD/JPY followed its bullish seasonal trend last month, reaching near 158.00 intraday before turning lower to break a bullish trend line to start December. With renewed hopes of a BOJ rate hike on the table, there is the potential for fundamental support for the bearish seasonal outlook.
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 historically seen strong performance in December, with an average drop of +0.7% going back to 1971. Last month, the Aussie continued its seven-month string of choppy price action in the mid-0.60s, leaving little in the way of a clear trend, so traders may want to be wary about the seasonal trend unless or until we can see a meaningful break above 0.6600 resistance.
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 n eutral month for USD/CAD, with an average historical return of -0.0%. As we go to press, USD/CAD remains (barely) within a bullish channel, keep hopes of ongoing strength alive, though the pair is dipping below its 50-day EMA for the first time since September. If the seasonal trend holds this year, we may see further consolidation and an eventual break of the multi-month uptrend.
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
