8 Forex Seasonal Patterns to Watch in December

12/04/2013 9:00 am EST

Focus: FOREX

You’ve heard of the 12 days of Christmas, but here, Adam Button of ForexLive.com takes a look at eight seasonal tendencies in forex and other key markets for the last month of the year.

#8 AUD/USD has fallen in seven of the past nine Decembers.

The kicker? The two years of gains were 2008 and 2012, where AUD/USD gained 7.2% and 6.7% respectively. On average, December through April are a strong seasonal time of year so weakness may prove to be a longer-term buy opportunity.

#7 Think NZD follows AUD? Think again.

In contrast to AUD, the New Zealand dollar has gained in 10 of the past 12 Decembers. Over the past 10 years, December is the best month for NZD/USD longs.

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#6 December is a bad month for pound bulls.

December is the second-worst month for cable, with an average decline of 0.6% over the past 10 years. The worst, by far, is August.

Looking for a way to bet against Old Blighty? December is the best month for EUR/GBP longs. It’s not as strong as the 2% gain on average over the past 10-years because of a whopping 15.7% gain in Dec 2008 but it’s still a good bet, at least on seasonals.

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EURGBP monthly chart
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#5 Time for a bear market in bonds?

Treasury yields tend to rise in December (meaning that bond prices fall). If not for a massive drop in 10-year note yields in December 2008, it would be the weakest month for bonds. It’s also the start of a weak seasonal period for Treasuries that lasts through April.

If Bernanke decides to put the helicopter in the hangar, or even hits at it in December, this would be a big trade and point to sustained US dollar strength.

#4 Stock market bears stuck in a conundrum.

The S&P 500 has gained for eight consecutive weeks, the longest winning streak since 2004. Time to bet against stocks? Probably. But keep in mind that December has been second-best month over the past 10 years, with an average gain of 1.9%.

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S&P500 weekly
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#3 Time for a Nikkei rally?

December has easily the best month for Japanese stocks with an average 5.3% rally over the past 10 years—which is quite an accomplishment in a market that has been almost flat over that time.

What’s more? The long-term Nikkei 225 chart is on a roll.

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Nikkei monthly chart
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#2 USD/JPY made a big gain in November, why it will continue in December.

December is the fourth best month for USD/JPY longs over the past 10 years with an average gain of 0.27% (February is easily the best month).

In November, USD/JPY gained 3.4%. In months with 2.5% gains or more over the past 10 years, USD/JPY continued to climb the following months in 13 of the past 17 instances.

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USD/JPY with months of 2.5% gains highlighted
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#1 December is easily the best month for EUR/USD

Ready for a Euro-cember? December has been the best month for the euro, on average, over the past 10 years.

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EUR/USD seasonals
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Warning: the numbers are skewed by a whopping 10% gain in Dec 2008 and in the past four years, EUR/USD has experienced 4.5% and 3.6% monthly declines so, if anything, volatility is more of a trend than gains.

December is also the best month for EUR/JPY with an average gain of 1.5%.

By Adam Button, Editor, ForexLive.com

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