Japan’s industrial production dropped by 2.6% in November, worse than the expected 2% decline. This decline indicates a tough economic landscape for industrial performance. Many asset markets experienced shifts, with USD/CAD nearing five-month lows due to different policies in Canada and the US. Meanwhile, gold fell from its previous all-time highs, trading under $4,500 as trading slowed ahead of the holiday season.

Market Trends And Predictions

GBP/USD stayed in a tight range around 1.3500, influenced by light trading and holiday market conditions. Bitcoin was around $86,770, unable to break the $90,000 mark, while ETF outflows reached $188.64 million. Predictions for 2026 show continued growth, supported by factors from the previous year. However, Avalanche faced challenges trading near $12 after regulatory updates on an ETF conversion. The document includes disclaimers about investment risks. It stresses the need for thorough research before making financial decisions, noting that the information is for informational purposes only. FXStreet is not liable for any losses from reliance on this data. The unexpected 2.6% fall in Japan’s November industrial production suggests deeper economic issues. This marks the largest monthly decrease since the second quarter of 2025. It may be wise to consider buying put options on the Nikkei 225 or call options on USD/JPY, expecting further weakness in the Yen as Q4 GDP forecasts are revised downward.

Federal Reserve Impact On Markets

The US Dollar’s weakness is a key theme as we head into the new year, driven by ongoing expectations for Fed easing. Current data shows more than an 85% chance of a 25-basis-point rate cut by the March 2026 meeting. This outlook supports strategies that benefit from a weaker dollar, like being long on gold or the Canadian Dollar. Gold has dipped below $4,500 after reaching record highs, likely due to holiday profit-taking rather than a trend change. Similar pullbacks were noted during the 2020-2021 rally, which often offered buying opportunities for call options or bull call spreads. Watch for support around the $4,450 level before entering the market again, as the factors supporting a dovish Fed remain intact. With the S&P 500 in low holiday trading, reduced liquidity may amplify movements in the upcoming sessions. The CBOE Volatility Index (VIX) is at yearly lows of 11.8, making long-dated call options fairly inexpensive for positioning toward anticipated growth in 2026. However, it’s prudent to stay hedged against any year-end rebalancing that could lead to a short-term dip. The recent drop in Bitcoin below $87,000 should be monitored closely since it reflects institutional sentiment. Spot Bitcoin ETFs have seen over $750 million in net outflows this week, a sharp contrast to the strong inflows in November 2025. This indicates bearish sentiment in the short term, making protective puts a wise strategy against further declines. Create your live VT Markets account and start trading now.

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