Forex Analysis & Reviews: 04.12.2023 - EUR/USD: Will euro maintain...

Live Chat

InstaForex - Official partner of Dragon Racing

This section features the most important information about trading with InstaForex. We provide both analysis from leading experts for experienced traders and articles on trading conditions for beginners. Our services will help increase your profit potential.

Become Trader

Account Opening

See also

Trading Conditions

Forex Analytics

Charts

This section is designed for those who are just starting their trading journey. InstaForex educational and analytical materials will meet your training needs. Our experts' recommendations will make your first steps to trading success simple and clear.

Start as Beginner

How to start trading

Useful information

Training and recordings

InstaForex innovative services are an essential element of productive investment. We strive to provide our clients with advanced technical capabilities and make their trading routine comfortable as we are recognized as the best broker in this regard.

Become Investor

PAMM System

ForexCopy System

Passive investments

OYS account

Partnership with InstaForex is beneficial and top-tier. Join our affiliate programs and enjoy bonuses, partner rewards, and the possibility to travel with the team of the world-renowned brand.

Become Partner

Main Page

Partner Area

Advantages for Affiliates

Registration

This section contains the most lucrative offers from InstaForex. Receive bonuses when topping up an account, compete with other traders, and get real prizes even when trading in a demo account.

All Promo Campaigns

Bonuses

Contests

Events

Holidays with InstaForex are not only pleasant but also useful. We offer a one-stop portal, numerous forums, and corporate blogs, where traders can exchange experiences and become successfully integrated into the Forex community.

Full details

Forums

We are in social networks

Forex humour

Forex Portal

InstaForex is an international brand created in 2007. The company provides services for online FX trading and is recognized as one of the world's leading brokers. We have won the trust of more than 7,000,000 retail traders, who have already appreciated our reliability and focus on innovations.

Learn More

History

Why Choose Us

InstaSport

Regulation

Company News

Awards

InstaForex Stars

InstaForex Offline

Headquarters

Key documents

Social Responsibility

InstaForex - Official partner of Dragon Racing

04.12.2023 09:36 PM

EUR/USD: Will euro maintain seasonal strength this December?

Winter in 2023 arrived too early. Typically, American stock indices rise towards the end of December, a phenomenon known as the Santa Claus rally. However, the S&P 500 already gained about 9% in November amid an increased probability of the Federal Reserve's monetary policy easing in 2024. As a result, global risk appetite increased, and EUR/USD quotes soared to three-month highs. Whether the upward movement will continue depends on investors' Greed.

MUFG notes the seasonal strength of the euro in December. Over the last 20 years, the average increase in the main currency pair at the end of the first month of winter has been 2.6%. Even if we exclude its surge by 10.1% in 2008, the indicator will still exceed 2%. In 8 out of 11 cases when EUR/USD closed in the green zone in November, it increased in value in December. This rally is usually driven by an improvement in global risk appetite, rebalancing of investment portfolios, and an influx of travelers to Europe for Christmas. All these factors may come into play in 2023, but MUFG still advises paying attention to new macroeconomic statistics.

Investors expected Fed Chairman Jerome Powell to throw a wrench into the S&P 500 and EUR/USD. However, Powell did not say anything new in his speech at the end of the week by December 1. Interest rates are in a range that limits economic growth. They may rise if necessary. It is too early to talk about easing monetary policy. We've heard all this before. Should it be surprising that U.S. stock indices rose, allowing them to close the fifth consecutive week in the green zone?

Dynamics of market expectations and the Fed's monetary expansion in different cycles

Derivatives increased the chances of the first rate cut in federal funds in March from less than 50% to 60%. They expect borrowing costs to fall by 125 basis points in 2024. And these are not the most aggressive forecasts. On average, six months passed between the last rate hike and its cut. In most cases, except perhaps 1995, the Fed eased monetary policy faster than investors currently expect.

In conditions of market Greed, EUR/USD quotes should have risen higher. However, investors are betting that the ECB will start the monetary expansion cycle earlier than the Fed against the backdrop of a faster slowdown in inflation in the eurozone than in the United States. Being the first is not very pleasant, making the euro one of the outsiders in Forex. It is not surprising that the major currency pair is trying to find a consolidation range. The tops cannot, the bottoms do not want to.

Technically, on the daily chart, the formation of a doji bar with a large lower shadow indicates the weakness of the bears. Breaking its high at 1.0915 is a reason to form long positions. However, if the bulls fail to grasp the fair value at 1.0875, this will be a signal of their extremely vulnerable position. At the same time, a drop below 1.085 will provide an opportunity to increase the shorts formed from 1.094.

You have already liked this post today

*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.