The average monthly performance of the euro against the dollar over the past 20 years shows that EUR/USD Economists at Société Générale say the pair typically rose in December.
The danger of falling on an icy pavement in January
“Over the past 20 December, EUR/USD has risen 16 times, making it the euro’s best month by some distance. Part of the reason may be that sentiment towards the euro was more often negative during this period. For example, the average FX market position was short in euros during this period. This means that there is often pressure to cover short euro positions by the end of the year.
“January is usually the worst month for the euro, perhaps because the bearish mood doesn’t go away. This year, with a massive dollar-bullish consensus pushing EUR/USD lower, short-term covering pressures may be even greater than usual.”
“The danger is that the conditions for January’s EUR/USD swing are very easy to imagine. US consumers, still buoyed by strong balance sheets, continue to spend Fed he is forced to remain a hawk in the new year. Winter is coming to Europe and concerns about energy supplies are growing. Russian missile attacks on Ukraine raise fears of a bloody stalemate. This kind of news after a strong recovery in the euro is exactly the kind of icy pavement that even a careful currency strategist could fall on!’