The month of December can be a defining month for forex traders.
The final month of the year offers the final chance to cement a solid performance or recoup losses.
During the holiday period, flows are notoriously quiet into the back end of the year. However, opportunities still abound over the month.
Given the unique events which have unfolded this year, this is even more true.
So, read on to find out some of the best trading opportunities which lie ahead across the remainder of the year.
1 – Santa Rally: Upside in Stock Markets
The Santa Rally refers to the phenomenon of the stock markets tending to rally over the final two weeks of the year.
This dynamic has become as entrenched as the “sell in May and go away” approach.
While social restrictions and travel disruptions might offer some downside risks this year, markets have been bolstered by the starting of COVID vaccinations both in the US and the UK.
With this in mind, stock markets look poised for further gains across the end of the year and into 2021. Stock indexes such as the S&P500 and the Dow present upside opportunities.
While price holds above the 3586 level, the outlook remains firmly bullish for the S&P.
The near term view remains in favor of an eventual break of the 3714.50 all-time highs and a continuation higher, supported by the rising trend line from YTD lows.
2 – Holiday Trade: Amazon
In terms of individual equities, one stock that has plenty of upside left is Amazon.
The company has delivered record volumes this year. This came as a result of the lockdowns which have made consumers even more reliant on Amazon’s services.
Social restrictions and lockdowns are due to remain in place across many countries over the holiday period. And this tends to be a high-volume period for deliveries anyway.
So, Amazon stands to make further profits. Additionally, the company has recently launched an online pharmacy service which is likely to increase its volumes further over the holiday period.
Amazon shares have traded firmly higher over the year but have recently paused, settling into a contracting triangle pattern. This pattern highlights consolidation within the longer-term bull trend and offers the opportunity to play an upside breakout of the 344.45 and 3552.59 levels.
3 -Brexit: Upside Risks in GBP
GBP has suffered a great deal of negative news-flow over recent weeks and months due to the labored and mostly fruitless Brexit trade talks.
While leaders on both sides have displayed plenty of pessimism, the fact that talks have continued to be extended beyond previous deadlines highlights the desire on both sides to agree on a deal.
Now, with just weeks to go until the deadline, the UK PM and EC president have both offered glimpses that a deal could be done, although there is just a “narrow path” there.
If they finally reach a deal, this will avoid a major economic cliff edge in the UK. It will also take a great deal of pressure off the BOE, putting the focus back on vaccine optimism.
Therefore, this would create room for a breakout higher in GBP.
GBPUSD is starting to move above the 1.3516 level which is a major long term resistance level.
The break above here confirms the move above the long term bearish trend line and the start of a potential bullish trend reversal. Upside opportunities on a break of 1.3474 targeting 1.4343 next.
4 – Fed Easing & Fiscal Stimulus
At the December FOMC meeting, the Fed reaffirmed its commitment to maintaining a highly accommodative monetary policy by extending its monthly asset purchases.
The Fed said it will continue its monthly purchases of at least $120 billion until there is substantial economic recovery.
Furthermore, with the US government inching closer to passing a second fiscal stimulus bill, the risks in USD are fixed firmly lower heading through the rest of the year and into 2021.
The USD Index is trading lower within a downward channel and has recently broken below the 90.50 support.
While price is below this level, the channel looks likely to develop further with targets at 89.36 and 88.32 next. A break of the channel low will accelerate the downtrend.