Seasonality Effect on FX

In the foreign exchange market, seasonality is usually unfavorable for the US dollar. Therefore, we expect it to drop slightly in the coming weeks.

The macro point

In this holiday season, we tend to forget that seasonality becomes an important marker in the evolution of exchange rates. Technical factors and liquidity in FX take precedence. Generally, this is rather positive for the EUR/USD. We are entering a period where seasonality is a key marker in the foreign exchange market. Specifically, currencies tend to move mainly due to technical factors, capital flows, and year-end liquidity. A similar movement is observed in stocks. This is known as the Christmas rally. On the currency market, there is a notable difference, however. Some currencies perform better during this period, while others tend to decline. Take the EUR/UD. In the last sessions of the year, the main currency pair usually experiences a significant rise. Two main factors explain this increase: The evolution of capital flows. European companies convert their dollar-denominated revenues into euros before the annual accounts close. Moreover, European asset managers, who have about 60 to 70% of their equity exposure in the United States, tend to take their profits in dollars and repatriate them, converting them into euros along the way. This will certainly still be the case this year, given the strong performance of US stocks (+15% since January for the main S&P 500 index, for example). The weakness of liquidity. It drops significantly in the last weeks of December. Directional movements in currencies are amplified. In this context, the dollar is generally less sought after, partly because its role as a safe haven is not needed. If everything goes as expected, we could see an increase in the EUR/USD in the upcoming sessions, potentially towards 1.1850, which acts as the main resistance. If breached, this would open the door to testing the psychological zone at 1.20. At the macroeconomic level, the global environment is rather positive. The abundance of liquidity is an essential factor for economic growth. Good news, liquidity is present almost everywhere! The United States is suspending the Federal Reserve's quantitative tightening, showing record deficits and considering $2,000 stimulus checks. China is posting the largest budget deficit in its history. Japan is preparing a $110 billion stimulus plan. Finally, the EU plans to allocate about $1,000 billion for defense. All this will obviously support economic activity next year. Is there a risk that this will also create inflation? We doubt it. In the eurozone, inflationary pressures are almost nonexistent. On the other side of the Atlantic, they are present but far from being a serious threat to the growth trajectory. We thus finish the year on a rather positive note with optimistic prospects for the coming year.

Technical point

No significant changes for EUR/GBP and EUR/JPY, however. We are still positioned bullish on the EUR/GBP pair with a target at 0.8890. The rate differential benefits the euro. While the European Central Bank (ECB) has ended its easing cycle, the Bank of England (BoE) may still cut its rates twice in 2026. As for EUR/JPY, our first price target is at 183.50. It could be reached quickly. If the upward trend continues, the pair could test unprecedented levels in decades, like the 187/188 zone (long-term). We do not believe in a strengthening of the Japanese yen in the medium term.

Last important point, the yuan. At the Central Economic Work Conference held a few days ago, China reaffirmed - as was the case in 2024 and 2023 - its intention to maintain a stable yuan exchange rate. No surprise. But this silences rumors of Chinese currency devaluation that are frequent in the currency market.

The supports and resistances below indicate the low and high points within which the prices should evolve during the week.

	Weekly Supports		Weekly Resistances
	S2	S1	R1	R2
EUR/USD	1.1590	1.1683	1.1850	1.2000
EUR/GBP	0.8610	0.8690	0.8800	0.8830
EUR/CHF	0.9190	0.9280	0.9390	0.9412
EUR/CAD	1.5890	1.5988	1.6209	1.6235
EUR/JPY	179.99	181.45	182.99	183.50

Announcements to follow

It goes without saying, the economic agenda is not very full this week due to Christmas. The only important statistic will be the first estimate of U.S. GDP in the third quarter (it reached 3.8% in the second quarter). It will certainly be a strong figure. U.S. growth is driven by massive investments in artificial intelligence. We expect the United States to end with 3% growth this year. Nice performance!

Below are the publications and events that should have a major impact on the evolution of exchange rates.

Day	Time	Country	Indicator	What to expect?
12/23/2025	14:30	USA	U.S. GDP (Q3)	Previous at 3.8%.

The information presented in this publication is provided to you for informational purposes only and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should not be used as a basis or be taken into account as an incentive to engage in any investment.