In December, Tokyo’s Consumer Price Index (CPI) excluding fresh food rose by 2.3% compared to the previous year. This growth was lower than the expected 2.5%. The USD/CAD pair is trading near five-month lows due to differing policies between the Bank of Canada and the Federal Reserve. Gold prices have slipped from their record highs and are now below $4,500 as traders take profits.

Forex and Cryptocurrency Highlights

The EUR/USD pair had trouble finding direction, moving sideways below 1.1800. The GBP/USD pair stayed around 1.3500 as holiday trading remains quiet. Bitcoin fell below $87,000 amid increased outflows from ETFs, indicating less interest from large investors. Predictions for 2026 suggest strong economic performance in advanced countries. Avalanche is valued near $12 after Grayscale filed to convert its Avalanche Trust into an ETF. Several articles are available that recommend the best brokers for 2025, catering to different trading needs and regions. The FXStreet platform aims to provide information, not specific advice for buying or selling assets. It’s important to consider the risks of trading, and FXStreet encourages independent research for making decisions. With Tokyo’s December CPI falling short of expectations at 2.3%, the Bank of Japan may find it harder to raise interest rates. This sign of slowing inflation could delay policy changes, suggesting a weakened Japanese Yen. We should consider using options to prepare for a higher USD/JPY rate in early 2026.

Economic Outlook and Trading Strategies

The main theme is the expectation that the Federal Reserve will ease its policies, which is putting pressure on the US Dollar while boosting gold prices. Gold’s recent drop below $4,500 seems temporary as traders take profits in a thin market during the holidays. With futures indicating over a 75% chance of a Fed rate cut by March 2026, this dip appears to be a good time to buy call options on gold. The Fed’s soft stance, combined with a strong economy, supports a favorable outlook for US stocks in the coming year. Recent economic data from the third quarter of 2025 shows solid GDP growth of 2.1%, reinforcing the “soft landing” view that allows for rate cuts. We should consider buying S&P 500 call options that expire in early 2026 to benefit from the anticipated market strength. Lastly, we note the very low volatility typical during holidays. The VIX index is currently near its 52-week low, a trend we observed in late 2023 and 2024 before markets picked up again in January. This situation offers a cheap opportunity to buy VIX call options or long-volatility instruments in anticipation of active markets returning next month. Create your live VT Markets account and start trading now.

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