Foreign investment in Japanese stocks fell to ¥96.8 billion on December 5, a big drop from ¥655.6 billion previously. This shift shows that investors are changing how they buy Japanese stocks. Gold prices are declining in regions like the United Arab Emirates, Pakistan, India, and Malaysia, despite bumps in other markets. The EUR/USD currency pair rose to multi-week highs, nearing 1.1700, due to a sell-off of the US dollar. The GBP/USD also increased, reaching seven-week highs after the Federal Reserve announced a rate cut. In the cryptocurrency market, Terra jumped by 40%, while MemeCore and XDC Network held onto their gains. Hyperliquid targeted a breakout at $30, recovering from support at $27.50. The Federal Open Market Committee issued projections showing few rate cuts and higher GDP forecasts. Their dot plot indicates that interest rates may average 3.4% by 2026, consistent with earlier estimates. The sharp drop in foreign investment in Japanese stocks serves as a warning. After significant inflows that boosted the Nikkei to record highs in 2023 and 2024, this change suggests big investors are taking profits. It could be wise to consider buying put options on the Nikkei 225 index, as this trend might continue into the new year. The recent rate cut by the US Federal Reserve has weakened the dollar, which the market reacted to right away. Nevertheless, the Fed’s comments hint at a pause, and they’ve raised their GDP growth forecasts. This mixed message, termed a “hawkish cut,” suggests the dollar’s weakness might not last, so we should be cautious about taking on too much short-dollar risk. For now, the weak dollar is boosting currencies like the Euro and British Pound, with EUR/USD testing the 1.1700 level. Short-dated call options could help us trade this upward momentum over the next week or two. Still, we need to be on guard for any signs of a dollar rebound, as the Fed’s cautious approach might soon bring sellers back into the market. Gold’s rise towards $4,250 is mainly due to lower interest rates, continuing a strong trend that started when prices surpassed $2,100 in early 2024. While this trend is solid, this price point presents a significant psychological barrier. We believe using call spreads is a smart way to maintain a long position while guarding against a potential pullback. Overall, the Fed’s actions seem to clash with their economic forecasts, leading to uncertainty. The US VIX index, which measures stock market volatility, has already risen 5% to 14.1 in reaction to these mixed signals. We see a chance to buy options that benefit from price fluctuations, such as straddles on the S&P 500, as the markets sort out which of the Fed’s signals to heed.

here to set up a live account on VT Markets now