One more profitable month for our records – December 2015 Monthly Review
The market has been waiting for this month… at least since September because a few big events were scheduled for this month. We had the FED, who had raised hopes for a rate hike this month and they fulfilled their promises. This makes is the first rate hike in a long time among the developed countries and marks the start of a tightening cycle. The ECB, on the other hand, are easing the monetary policy even further as they cut deposit rates and promise to add some extra months to the QE program. Yet, the Euro rallied because the market was expecting a lot more. These events led to another profitable month, making 551 pips in total.
Draghi and Yellen offered some good forex action this month
Forex Signals
We had another good month and our sequence of consecutive profitable months continues. We didn´t get off on the right footing and got caught on the wrong side of the ECB when they disappointed the market; the enormous volatility led to some huge and unpredictable moves. But we were quick to react to these market changes and adapt to the new conditions, and still closed the month with a 551 pip profit. After our forex analysis suggested that EUR/USD had reached a high point of 1.10-1.1050, at least in the near term, we opened several long-term sell forex signals in EUR/USD which nearly all closed with some very good profit. The FED move when they hiked the interest rates in the third week was more predictable and easier to trade, which contributed in our success this year. The last two weeks of the month (aka the holiday season), the market became somewhat chaotic but we were careful and cut down on the number of signals, making more than 100 pips in the last two weeks.
The 20 and 50 MAs provided the resistance and several selling opportunities at 1.10-1.1050
We started the first week ‘OK’, but as we said above the ECB didn´t deliver what they had promised and the market was disappointed. So we had some losses on Thursday, but we made up for most of that on Friday, closing the first week with 97 pips (in red) and with 22 opened forex signals. We changed our strategy to adapt to the new conditions, and on the second week, we made 237 pips. Our good performance continued and we made another 252 pips on the third week. Then, we entered the holiday season and with liquidity declining dramatically the market became more irrational, but we just managed to close the fourth week with only a 24 pip loss. We adapted again to the new changes and reduced the number of signals – making 159 pips on the last week, and this has brought the total for December to 551 pips. We issued 79 forex signals this month, 19 of which hit stop loss, making our win/loss ratio was 76:24.
The market this month
December was an important month for two of the biggest currencies, the Euro and the US Dollar because the ECB and the FED both had important decisions scheduled for this month. After promising action in previous months, the Euro has been in a downtrend and the USD in an uptrend, so the month started with the US Dollar being well bid and the Euro on the wrong foot. On the third of December, it was time for the ECB first to make their move. Their rhetoric has been very dovish in both October and November, so the market was expecting them to set the deposit rates at -0.50%… or even close to the SNB rate at -0.75%. Besides that, the market was expecting an increase to the monthly QE purchase of 30 billion. Just two minutes before the rate decision, Reuters tweeted that the ECB would leave the rates untouched, which sent the Euro 100 pips up. That was a sign that there was going to be high volatility allday. The ECB published the numbers two minutes later and they did cut the rates (albeit not by much) from -0.20% to -0.30%. The Euro went down by 100 pips to 1.0520’s initially, but the market realized that the cut was not in line with the promises, and so everyone started reversing their positions and the Euro went up by 170 pips, reaching 1.0690s.
Then, everything froze to await the ECB press conference. President Draghi showed up and the conference started. He declared that the ECB would not increase the monthly asset purchases but would extend the QE program for another seven months. This means the additional QE amount would be bigger than if they increased the monthly purchases by 30 billion. But the market wasn´t impressed by this and was instead disappointed. We know that the forex market is impatient and wants things ‘here and now’ rather than eight months later. So the Euro started to feel the love and rocketed up to 1.10 and even 1.1050 a few days later. Then, it was the time for the FED and the attention shifted to the other side of the ocean. Most economists were expecting that the FED would increase the interest rates, but the market was still skeptical after failing to hike the rates that September. Then, on Wednesday the 16th, the FED finally hiked for the first time in eight years, starting the first tightening cycle among the developed economies. The USD gained about 200 pips but since then the EUR/USD has been trading sideways. The last two weeks after that was choppy and slow as we entered the winter holiday season and most traders left their desks for the holidays. USD/CAD continued to extend the long-term uptrend and it broke level after level, finally reaching 1.40.
Economic Data
The Japanese data has been largely disappointing all year round, but this month we saw some slender rays of light. It didn´t show much improvement in many sectors but retail sales picked up a little, with the average earnings a tad higher and greater consumer confidence. That´s as good as it gets right now. The British economy has had an impressive run but it looks like it´s leveling out now, and has reached the point of normality. The manufacturing and construction sectors have both missed expectations but still well above the 50 point level so they are still in
Pairs analysis
After getting close to 1.60 in June and failing to break above it, GBP/USD has been in a downtrend but has picked pace in the recent months and finally moved below April´s low. As we can see from the daily chart, the price had a go at the 50 MA in yellow by the middle of the month but quickly reversed down and didn´t look back. On the monthly chart, we can see that the price right now is at an important long-term support level. The stochastic and RSI are heading down with plenty of room to go until reaching the oversold area, I wouldn´t be surprised to see this support level give up.
The 50 MA provided resistance this month
We are at an important support level at the moment
AUD/USD has been in a downtrend for a long time but is going through a retrace period right now, and even with most of the majors declining against the US Dollar in the recent months the Australian Dollar has made some gains. It broke above the 20 MA some weeks ago and it seems like this MA has turned into support now. Two weeks ago, the weekly candle finished as a doji (which means a reverse will follow) and last week the price moved up. If it continues up, the lows from March (around 0.75) will be the first level to provide resistance and the 50 MA (in yellow) comes around there and can provide extra strength.
The 20 MA, in gray, has turned into support
Will the price reach the 100 smooth MA in red?
This month’s conclusion
There went another month and another year for us. It´s been a good year at fxmarketleaders.com and we closed with another very profitable month. The ECB disappointed the market expectations which led to some huge moves and high volatility. The price action was choppy this holiday period due to thin liquidity but we managed to come on top and make 551 pips at the end. We head into a new month and a new year and we´ll try our best to keep the same performance as last year.
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