FOREX: EURUSD Seasonality May Impact Towards Year-End
Dec-04 13:25
- Ongoing greenback weakness has been supporting EURUSD to fresh 5-week highs this morning at 1.1682. Factors underpinning the move centre around a more dovish profile for the Fed under potential Hassett leadership and an associated more optimistic risk backdrop, but year-end seasonality may also factor in.
- Indeed, in 17 out of the last 25 Decembers, EURUSD has seen gains when comparing monthly closes, with an average move of +1.42%. This is the directionally largest USD seasonality pattern of any month across all of the EUR, JPY, and GBP (see chart below).
- While not guaranteed in any year, factors potentially bolstering bullish EURUSD seasonality in December could be wide-ranging: These may include year-end portfolio rebalancing following US equity outperformance, profit-taking dynamics, year-end flows related to corporate FX and asset management risk reductions, as well as macro data patterns.
- Specifically, while US equities have not been structurally stronger in 2025 than their European counterparts (SPX and Estoxx both +16/17% YTD), asset manager positioning may still be skewed towards the US - meaning reduction in risk exposure towards year-end may still underpin EURUSD this month.
- However, note that the DXY has lost around 9% YTD, meaning that FX position squaring may tilt favourably towards the USD this time.
- ING "retain a bearish bias on the dollar, and our EUR/USD target for year-end remains 1.180".
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CHF: More FX Exchange traded Option
Nov-04 13:25
- CHFUSD (5th Dec) 130.5c, sold at 0.02 in ~1k.
The Underlying December contract trades at 124.23.
EQUITIES: UBS' CTA Exit Triggers Remain Some Distance Away Despite Pullback
Nov-04 13:22
UBS write “continuous positive price action in equities has been very profitable for CTAs in the last three months. Strong Q3 earnings are not derailing the trend, encouraging CTAs to stay put despite heavy positioning”.
- Based on their forecasting model they suggest that “only a 2std downturn scenario will spark some CTA selling, with 6,650 (S&P)/5,450 (SX5E)/9,250 (FTSE100)/46,700 (NIKKEI) acting as respective trigger points”.
- Those levels remain some distance away, despite the previously detailed pullback in equities (which has started to reverse). This suggests that CTA liquidation did not play a part in the equity weakness witnessed during Asia & early London trade.
CAD: FX Exchange traded Call seller
Nov-04 13:17
CADUSD (5th Dec) 72.00c, sold at 0.08 in ~1.9k.
