Japan’s industrial production fell dramatically in November, dropping from a year-on-year growth of 1.6% to -2.1%. This sharp decline indicates weakening economic conditions, which may affect Japan’s overall economic outlook. In financial markets, various assets showed mixed trends. The USD/CAD pair hovered near a five-month low, influenced by the contrasting policies of the Bank of Canada and the Federal Reserve. Meanwhile, gold prices pulled back from their record highs due to profit-taking amidst lighter trading activity.

Market Trends Observed

The GBP/USD pair showed a slight downward trend in slow holiday trading as the market remained stable. Bitcoin dipped below $87,000 due to ETF withdrawals and less activity from major holders. Looking ahead, economic forecasts for 2026 suggest potential growth, buoyed by trends from 2025. However, the cryptocurrency Avalanche encountered difficulties, trading around $12 as regulatory pressures emerged. In the brokerage industry, the focus for 2025 will be on identifying top brokers across regions and platforms, considering cost-effective trading, and providing excellent market exposure. These insights are essential for traders navigating complex market conditions. With Japan’s industrial production unexpectedly dropping to -2.1% in November, we see a clear sign of economic struggle. This sharp shift from October’s 1.6% growth marks the weakest reading since the slowdown in late 2024. This likely means that the Bank of Japan will need to keep its loose monetary policy, suggesting a good opportunity to buy call options on the USD/JPY pair, betting on further yen weakness.

Economic Sentiments and Strategies

The broader market remains influenced by expectations that the US Federal Reserve will ease its policy in early 2026. This sentiment has helped push gold prices to record highs above $4,500, backed by recent data showing US CPI inflation cooling to 2.5% in November 2025. We believe this is a strategic moment to buy long-dated call options on gold during its brief pullback, as we anticipate the upcoming rate cuts. As holiday trading slows, market volatility is low, with the VIX index lingering near its yearly low of 13. Although the outlook for the S&P 500 in 2026 seems favorable, this phase of low trading volume can be misleading. The current low option prices present a good opportunity to purchase cheap, out-of-the-money put options as a hedge against potential market shocks when trading resumes fully in January. Additionally, there is a noticeable policy divergence between the Bank of Canada and the Fed, pushing the USD/CAD exchange rate to a five-month low. At its December 2025 meeting, the BoC maintained a hawkish stance while the Fed softened its position, implying the current trend could continue. As such, we are looking to sell call option spreads on USD/CAD, benefiting if the pair remains below specific levels. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now