EURUSD bulls

German PMI figures outperformed expectations, reaching 46.7, strengthening MoM by a value of 1.6 indexed. Whilst this is still firmly in contractionary territory for the German economy and the number of new orders remains heavily depressed, It was still a kernel of good news for Germany and the wider Eurozone. By the same token, Eurozone manufacturing PMI figures also exceeded expectations and suggested that the worst of the energy supply shock had subsided, the worst energy costs being seen in August and showing a slight decline as European nations reacted. This optimism was undoubtedly partly responsible for EUR/USD’s strong rally yesterday, EUR gaining 1% against the greenback in a days trading. ©Caxton

EURUSD is trending higher on the H1, so find a fundamental narrative that fits the price action :)

Comment:

Even if history is not bound to repeat itself, it does not hurt to look at the patterns, especially when they are salient. Over the past two decades, December has been by far the best month for EUR/USD. The pair rose in 14 of all Decembers (70%), including every year from 2017 to 2021. This year-end effect promptly reverses in January, which seasonality tells us is the worst EUR/USD month, along with May.
This seasonality is probably telling us more about the clearing of positions in the last month of the year, than about a recurring change in macroeconomic fundamentals. The FX market piled on substantial euro shorts during the summer, which pushed EUR/USD below parity. The short covering started before markets knew that US inflation was decelerating, and at this stage, it looks unlikely to reverse. That would be the sixth year in a row that EUR/USD increase in December. We’re not inclined to position against that happening. ©Societe Generale

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