Dow Jones Industrial Average rises by 150 points on cooling PCE inflation and expectations of rate cuts
The Dow Jones Industrial Average gained 150 points on Friday, closing the week near 48,000. This rise was supported by September’s US Personal Consumption Expenditures Price Index data, which strengthened market confidence in a likely Federal Reserve interest rate cut on December 10.
The Standard & Poor’s 500 rose by 0.3% on Friday, positioning it to reach all-time highs soon. Core PCE inflation held steady at 2.8% year-over-year in September, unchanged from August, despite delays caused by the longest US government shutdown.
The University of Michigan’s Consumer Sentiment and Expectations Indexes for December exceeded expectations, while one-year and five-year Consumer Inflation Expectations from UoM dropped slightly.
Market momentum might slow down before the Federal Reserve’s rate decision on Wednesday. December’s meeting will also update the Summary of Economic Projections, which outlines interest rate expectations from the Fed policymakers.
The Core PCE measures monthly price changes in US goods and services and is the Fed’s favored inflation indicator. A high Core PCE reading typically strengthens the US Dollar, while a low reading has the opposite effect.
With the Dow Jones nearing 48,000, markets are anticipating a likely interest rate cut from the Federal Reserve on December 10. This would mark the third consecutive cut, a significant shift in policy that started earlier this year due to a slowing economy. The market’s positive trajectory relies heavily on the expectation of cheaper money.
Despite the September PCE inflation data being old, it shows a core rate of 2.8%, which is viewed positively. This is largely due to the major government shutdown this autumn. More crucially, the November Consumer Price Index report released last week confirmed a cooling trend, with core inflation falling to 3.1%. This gives the Fed a solid reason to proceed with another cut next week.
December’s consumer sentiment numbers were strong, while inflation expectations dipped, creating a “soft landing” outlook that is boosting the market. Currently, the CBOE Volatility Index (VIX) is low at 13, indicating that investors are not overly worried as they approach the Fed meeting.
Since over 90% chance of a rate cut is already factored in, according to the CME FedWatch Tool, the actual announcement may not lead to significant movement in the market. Instead, the focus should be on the Fed’s updated dot plot and economic forecasts. We should be ready for a “sell the news” reaction if the Fed’s guidance for 2026 isn’t as favorable as the market hopes.
With low implied volatility, buying options is relatively inexpensive right now. Traders might want to consider purchasing call options on the S&P 500 to take advantage of positive momentum through the year’s end, especially if the Fed’s message is encouraging. A dovish stance from the Fed could push the index beyond its all-time highs.
However, we should also prepare for a hawkish surprise in the forward guidance. If the dot plot suggests fewer rate cuts next year, this rally could reverse quickly. Buying some inexpensive, out-of-the-money put options on major indices could offer an affordable way to protect against a sudden downturn.
We faced a similar situation in late 2023 when markets surged on the promise of a Fed pivot, only to deal with volatility as the timing was delayed. This experience shows that the Fed’s future plans are often more significant than the immediate rate decision. The market’s reaction on December 10 will largely depend on the wording in the statement and the new projections.
This anticipated rate cut is also putting pressure on the US Dollar, favoring assets priced in the currency. With Gold nearing $4,200 an ounce, a confirmed dovish stance from the Fed could drive it even higher. Trading gold-backed ETFs with options is a direct method to capitalize on this potential outcome.
Elliott Wave analysis indicates that the SP500 is heading towards 7120.
The SP500 (SPX) is likely to keep climbing towards 7120, following an Elliott Wave pattern. A small 4th wave correction just finished, keeping the index above important support levels, currently 125 points higher (1.8%).
In a classic impulse pattern:
– The third wave typically extends to 161.8%
– The fourth wave reaches 100.0%
– The fifth wave can extend to 200.0%
Recent data supports these predictions, showing the index at 6850, dipping to 6780, and rising to 6895, with a margin of error of +/- 0.03-0.3%.
Looking Ahead
Next, we expect a small pullback in the gray 4th wave to around 6785-6825 before the index rises to 6930-7010. Pullbacks during uptrends are usually shallow, which could drive higher fifth wave targets and get us closer to the 7120 goal. After that, a longer decline to about 5800 (+/-400) seems likely. Be cautious with short-term levels at 6827, 6800, 6738, 6660, and 6597. Breaking these levels reduces the chance of an uptrend by 20%. Dr. Arnout Ter Schure, with vast experience in the energy and environment fields, shares these observations. Since late November, the market’s strength suggests that the rally to 6895 is almost finished. We expect a minor pullback to the 6785-6825 area, which should be seen as a buying opportunity. The strong November jobs report, showing a steady unemployment rate of 3.8%, backs this positive short-term forecast. For derivative traders, the upcoming dip is a great chance to enter short-term call options or bull call spreads. The goal is to profit from the next rise towards the 6930-7010 range. A break below 6827 will be our first signal to reduce bullish exposure.Long Standing Target
This next move is likely the final push toward our long-term target of 7120. As the index nears this level, the risk of a significant peak forming increases. We expect this to be the high point of the rally that started in April 2025. As we approach the 7120 target, we should shift our strategy to accumulating longer-dated put options, targeting March or June 2026 expirations. This prepares us for a potential long correction down to the 5800 area. Recent inflation data, which has risen back to 3.5% annually, supports the idea of an upcoming market-cooling event. Currently, the market shows signs of complacency, with the Volatility Index (VIX) dropping to 14. However, we expect this won’t last. This trend mirrors past major peaks, like late 2007, when low volatility preceded a sharp reversal. Be ready for significant volatility once we test the 7120 region. Create your live VT Markets account and start trading now.Consumer credit in the United States increased by $9.18 billion, falling short of predictions.
Consumer credit in the United States rose by $9.18 billion in October, missing the expected increase of $10.5 billion. This suggests that consumers are being more cautious when it comes to borrowing.
Currency Movements
The EUR/USD exchange rate stayed around 1.1650, influenced by US inflation and factors from the European Central Bank (ECB). The Canadian dollar gained strength after a positive labor report, while the Dow Jones Industrial Average rose as inflation slowed, increasing hopes for a rate cut. Gold started strong at $4,200 but later dipped as the dollar gained strength following stable PCE data. Expectations around Federal Reserve policy shifts are affecting market outlooks, including for cryptocurrencies like Bitcoin and Ethereum. Ripple is trading at $2.06 but continues to face challenges despite healthy inflows into XRP spot ETFs. In 2025, traders are encouraged to explore various brokers, paying attention to low spreads, leverage, and trading platforms to improve their trading strategies. The latest consumer credit report indicates a borrowing increase of $9.18 billion, which is below the expected $10.5 billion and suggests a cautious consumer base. This marks the third month in a row of slowing credit growth, a trend not seen since the economic instability of 2023. This decline strengthens the belief that the Federal Reserve may need to intervene to support the economy. With the Federal Reserve meeting set for December 10, market expectations are high, indicating more than a 90% chance of a 25-basis-point rate cut. This belief is further backed by recent data showing Core PCE inflation, the Fed’s preferred measure, has cooled to 2.4% year-over-year. The market is almost fully pricing in a rate cut, creating a tricky situation for the upcoming weeks.Strategic Trading Considerations
Since gold has already risen to $4,200 an ounce in anticipation of the rate cut, holding long positions could be risky. We recommend that traders consider buying protective put options on gold mining ETFs to guard against a potential “sell the news” scenario or if the Fed adopts a more hawkish stance. This strategy offers defined risk if the market’s expectations do not materialize. The general consensus is that the US Dollar is weak, pushing currency pairs like EUR/USD to around 1.1650. However, this positioning leaves the dollar at risk of a sharp bounce if the Fed’s statement is less dovish than anticipated. We’re looking into buying inexpensive, short-term call options on the US Dollar Index (DXY) as a low-cost way to benefit from a possible reversal. Implied volatility for major stock indices has dropped significantly, with the VIX hovering around 13, showing market complacency ahead of the Fed’s decision. This low volatility results in cheaper option premiums. We see a chance to buy straddles on the S&P 500, allowing us to profit from a significant price movement in either direction following the announcement. Create your live VT Markets account and start trading now.As the week ends, gold stays steady above $4,200 in anticipation of the Federal Reserve meeting.
**Gold Prices Stable**
Gold prices are stable, ranging from $4,200 to $4,250, as we await a possible rate cut from the Federal Reserve next week. Currently, XAU/USD is trading at $4,216 after hitting a high of $4,259 earlier in the week. The Core PCE Price Index, the Fed’s key inflation measure, is mostly unchanged at around 3%. This, along with softer job data and prior statements from the Fed, suggests a potential rate cut is coming.
A Reuters poll indicates that economists are largely expecting a rate cut in December, which might boost Gold prices. The CME’s FedWatch tool shows an 87.2% chance of a rate cut next week. The US Dollar Index remains steady, and the 10-year Treasury yield has increased to 4.141%. In September, the Core PCE, excluding food and energy, rose by 0.2%, leading to a yearly core PCE of 2.8%.
In technical terms, Gold might stay in the $4,200-$4,250 range ahead of the Fed’s meeting. If it breaks out, prices could rise to $4,300. Conversely, a drop below $4,200 might find support from various moving averages. Central banks hold significant Gold reserves, and factors like geopolitical issues can influence prices. Since Gold is priced in dollars, changes in currency value also affect its price.
**Federal Reserve Meeting Anticipation**
Today, December 6th, 2025, Gold remains above the $4,200 level as we anticipate the important Federal Reserve meeting next week. With an 87.2% chance of a rate cut priced in, the momentum appears to be upward. This strong expectation provides a solid support level for current Gold prices, keeping significant sell-offs at bay.
The Fed has room for this decision as inflation has been declining for months. Core PCE has dropped from 3.5% in spring 2025 to 2.8% now. This trend, along with a recent Non-Farm Payrolls report showing only 95,000 job gains, indicates a slowing economy that might allow for looser monetary policy.
For derivative traders, this suggests preparing for a potential breakout with call options or bull call spreads. The options market is leaning bullish, with January 2026 call options at the $4,300 strike trading at a notable premium. A dovish signal from the Fed could push prices toward the all-time high of $4,381.
However, we must remain wary of a “buy the rumor, sell the news” scenario, as the rate cut is widely anticipated. We recall the sharp $150 drop in summer 2024 when a expected cut did not materialize, so a hawkish surprise could be tough. Hedging long positions with puts below the $4,124 support level might be a wise choice.
Support for Gold remains strong due to ongoing central bank purchases, a trend we have seen since major buying began in 2022. The latest World Gold Council data for Q3 2025 confirmed an additional 250 tonnes added to global official reserves. This ongoing demand provides a strong foundation for Gold’s long-term future.
Technically, the price is tightly coiling in the $4,200-$4,250 range, building energy for its next movement. A clear break above daily highs of $4,259 would trigger a rally, while a surprising drop below $4,200 could target the 50-day moving average near $4,059.
Create your live VT Markets account and start trading now.
The Australian dollar rises against the US dollar after breaking out of a channel, nearing its yearly peak
The Australian Dollar is gaining strength against the US Dollar, reaching the highest point since mid-September. This rise comes from the belief that the Reserve Bank of Australia (RBA) will keep interest rates steady. Currently, the AUD/USD is trading at around 0.6637, marking two weeks of growth in a row. The possibility of the RBA raising rates next year adds support to this trend, especially since the Federal Reserve is taking a softer approach.
The technical chart shows a positive outlook, with the AUD/USD moving above important Simple Moving Averages. A strong support zone is established between 0.6550 and 0.6520, which could help prevent any sharp declines. The immediate resistance level is at 0.6650; breaking above this could push the currency pair toward a yearly high of 0.6707. Indicators like the RSI, which is near 68, and the ADX at 19 indicate a strengthening trend. Overall, both economic and technical factors favor the Australian Dollar right now.
The RBA’s decision on interest rates, set for December 9, is an important economic event. The current and previous rates are both at 3.6%. The central bank meets eight times a year to review its monetary policy.
The main factor in the market is the clear difference between the central banks. The Federal Reserve is indicating a softer stance, while the RBA is staying firm, which creates strong support for the AUD/USD. This policy split has driven the pair above the 0.6600 level recently.
Confidence in the Australian Dollar comes from solid domestic data. For example, the unemployment rate fell to 3.7% in November, and inflation was still high at 3.8% in October. This suggests that the RBA will likely keep a firm stance on December 9, with potential rate hikes on the horizon for 2026.
In contrast, the US Dollar’s weakness seems justified given the weakening economic signals. The latest Non-Farm Payrolls report from December 5 showed job growth slowing to just 120,000, and core PCE inflation decreased to 2.8%. These numbers support the expectation that the Fed will consider rate cuts for 2026 in their upcoming meeting.
Given this outlook, we recommend strategies that could benefit from further increases in the AUD/USD into early next year. Buying call options with strike prices above the yearly high of 0.6707 could provide a leveraged way to ride the rally. Traders might also explore bull call spreads to reduce entry costs while limiting potential gains around the 0.6800 level.
Expect implied volatility to rise as we approach the RBA and Fed meetings on December 9 and 10. While opinions are clear, any unexpectedly hawkish remarks from the Fed or dovish signals from the RBA could quickly change the current trend. It’s wise to use stop-losses or defined-risk options to manage this event risk.
This situation reminds us of late 2023, when markets began pricing in Fed cuts while the RBA kept its rates steady. That period led to a sharp rally in the Australian Dollar. History shows that once these policy differences gain momentum, they tend to continue longer than many expect.
US oil rig count surpasses forecasts, reaching 413 instead of 409
The Baker Hughes US Oil Rig Count hit 413, exceeding the expected 409. Other reports mention the EUR/USD stabilizing at 1.1650 due to US inflation and ECB concerns, the Canadian Dollar climbing after a good labor report, and Gold staying strong at $4,200 with predictions of a Fed rate cut coming soon.
Additionally, the AUD/USD is on track to reach a year-to-date high following a channel breakout, while Gold has dipped from its previous highs as the Dollar gains strength after stable US PCE data. Editorial highlights include movements in EUR/USD, GBP/USD, and Crypto markets, along with talks about possible Fed rate cuts and risks for Ripple.
Top Brokers For Trading Insights
This section provides a list of top brokers offering insights for trading, focusing on forex, gold, and high leverage options in areas like Mena and Latam. FXStreet reminds readers to do personal research before making investment decisions, noting the risks involved in open market trading. They emphasize that their information should not be seen as direct investment advice or recommendations. The rise of the U.S. oil rig count to 413 indicates that producers are ready to increase drilling, which could limit major increases in crude oil prices for now. With WTI crude around $85 per barrel, traders may interpret this as a signal of stable supply, not tightening. As a strategy, they could sell call options with strike prices above $90 to earn premiums, believing this new activity will restrict price gains. The market is closely watching the upcoming Federal Reserve meeting, with hopes for a rate cut rising sharply. Fed funds futures currently show a 90% chance of a 25-basis-point cut at the December 17th meeting, especially after the latest core PCE reading indicated a cooling at 2.5% year-over-year. This situation has boosted gold to an impressive $4,200 an ounce, a price not seen since early 2024 amid inflation.Potential Fed Market Impacts
With such high expectations, the major risk is that the Fed may disappoint the market. The VIX, which measures market fear, rose to 22 this week, indicating that options premiums are increasing before the decision. We might experience a classic “sell the news” event, where assets like gold and stocks retreat even if the Fed meets expectations, making protective put options on indices a wise choice. This atmosphere resembles the pivot from late 2023 when markets anticipated the Fed’s policy shift, sparking a strong year-end rally. However, this time, valuations are considerably higher, and the dollar is already under pressure from stronger currencies like the Canadian dollar. Traders are using options to speculate on a continued decline in the U.S. Dollar Index (DXY), with increased interest in puts below the 102 mark. Given gold’s high price, outright long positions carry risks. Traders are instead exploring derivatives for defined-risk strategies. Bull call spreads let them bet on further gains while limiting initial costs, which is attractive due to the high implied volatility. On the other hand, if the Fed decides to keep rates stable, there could be a quick market correction, prompting some traders to prepare with long-dated put options on major gold mining companies. Create your live VT Markets account and start trading now.Gold drops from recent highs as the US dollar strengthens with steady PCE data
Gold prices fluctuated on Friday, falling from earlier highs as the US Dollar gained strength after stable US Personal Consumption Expenditures (PCE) data. This keeps gold in the same trading range seen throughout the week. Despite a temporary dip, the outlook for the Federal Reserve remains supportive.
The US Dollar bounced back after the September PCE report revealed no surprises. Core PCE, which the Federal Reserve uses to measure inflation, increased by 0.2% month-on-month. The annual rate eased to 2.8%. Meanwhile, headline PCE stayed at 0.3% month-on-month, in line with expectations, and registered at 2.8% annually, slightly above August’s 2.7%.
Labor Market Volatility
Labor data indicates that the ADP Employment Change dropped by 32,000 in November, not meeting growth expectations. Challenger Job Cuts decreased to 71,300, while Initial Jobless Claims fell to 191,000, which was lower than predicted. The upcoming Nonfarm Payroll data and the JOLTS Job Openings report are crucial as we approach the Federal Reserve’s policy meeting in December. Gold continues to be a safe-haven asset amid ongoing Russia-Ukraine tensions. Technical analysis shows that XAU/USD must exceed $4,250 to draw more buyers. The overall upward trend persists, and a breakout above this level could lead to a potential rally toward $4,300 or higher. On December 6, 2025, gold was trading sideways around $4,215, influenced by the strengthening US dollar. This price stability occurs even though the market largely expects a Federal Reserve rate cut next week. It’s essential to prepare for volatility around the December 10 policy decision. The latest PCE report showed core inflation at 2.8%, a level that has remained stubborn throughout the year. While this is down from last year’s peaks, it has not yet returned to the Fed’s target of 2%. Such steady inflation reinforces market beliefs about an upcoming rate cut.Probabilities And Market Strategy
The likelihood of a 25 basis point rate cut at next week’s meeting is at a high 87%. This aligns with a broader trend of monetary easing seen throughout most of 2025 as the economy slows. For derivatives traders, this suggests that long positions via call options could be advantageous, anticipating a gold rally if the Fed adopts dovish policies. However, caution is necessary due to mixed signals from the labor market. The significant decline in the November ADP employment report contradicts stronger jobless claims data. Notably, the official payroll report for October and November will only be released on December 16, after the Fed’s decision. This timing poses risks since the Fed will be acting based on incomplete labor data. We should consider options strategies, like buying calls, to limit downside risk in case the Fed surprises the market with a hawkish stance. A breakout above the $4,250 resistance level after the meeting would signal a return of bullish momentum. The overall environment remains favorable for gold, providing stability to prices. Ongoing geopolitical uncertainty from stalled peace talks, along with consistent central bank buying that started gaining momentum in 2022 and 2023, creates a solid support base. Thus, any dips towards the $4,160 support level are likely to be seen as buying opportunities. Looking ahead, our strategy should be cautiously bullish. Using derivatives can position us for a potential rally while managing risk. We should consider contracts that expire after December 16 to benefit from the volatility surrounding both the Fed meeting and the upcoming payroll data. If the Fed disappoints, the dollar may surge, and we need to be ready to hedge or adjust our positions quickly. Create your live VT Markets account and start trading now.Netflix shares fall over 3% after acquiring Warner Bros.
Netflix shares fell by over 3% after announcing it will acquire Warner Bros. Discovery for $82 billion, or $30 per share. This suggests that Netflix’s growth is slowing down and it needs to find new revenue sources.
In the past, Netflix had a high stock value due to its unique growth strategy. However, this acquisition hints that the company’s innovation may be fading. Technically, Netflix’s stock has broken a key trendline established in October 2023.
This break indicates a possible long-term decline in the stock value. Predictions suggest it may drop to $70 per share by 2026, aligning Netflix’s worth with the wider streaming industry as it shifts its growth approach.
The market’s negative reaction to the acquisition signals an opportunity to bet against Netflix. The breakdown of key support levels suggests it’s likely to continue falling. Traders should consider purchasing put options that expire in January and February 2026 to take advantage of this anticipated weakness.
This situation is reminiscent of the subscriber growth panic from 2022, but now management has acknowledged that its previous growth model has failed. Recent figures show that in Q3 2025, subscriber growth slowed to just 1.5 million worldwide, well below the boom seen after the password crackdown in 2024. This acquisition seems like an expensive way to buy the growth that Netflix can no longer achieve on its own.
We also need to think about the huge debt this deal creates, which will reshape Netflix’s financial landscape negatively. Warner Bros. already had over $40 billion in debt, and adding the $82 billion acquisition cost will drive Netflix’s debt-to-equity ratio from a manageable 0.8 to over 2.5. This change turns Netflix from a flexible tech leader into a heavily indebted media company with slow growth.
As implied volatility spikes due to this news, buying puts directly has become costly. A smarter approach would be to use credit spreads, like selling call spreads, or initiating debit spreads, such as bear put spreads, to reduce entry costs. This allows us to maintain a bearish outlook while minimizing the effects of high premiums.
Breaking the trendline from October 2023 is a significant event that alters the stock’s character. Any small rally should be viewed as a chance to increase short positions, as the current chart indicates a sustained decline. The $70 price target for 2026 is looking more likely as the stock starts to lose its long-held tech premium.
The Federal Reserve may cut rates for the third time in a row, while the Bank of Canada stays steady.
The U.S. Federal Reserve is expected to lower interest rates for the third time in a row by 25 basis points. This decision comes after a split within the FOMC and signals suggesting a rate cut, even though inflation remains above 2%.
In contrast, the Bank of Canada is likely to keep its interest rates steady. Officials have stated that the current rate is suitable for keeping inflation stable while promoting economic growth amid uncertainty.
Upcoming trade data from Canada is crucial. Experts predict a 3.4% increase in merchandise exports and a 3.1% decrease in goods imports. These figures will help assess the third-quarter GDP data.
The U.S. Census Bureau’s trade data will also be carefully examined to see if CUSMA exemptions continue to support Canadian exports to the U.S. in September. This trade information is significant for understanding economic impacts.
We are now seeing the effects of the policy difference that started in late 2024. The U.S. Federal Reserve has made the expected rate cuts, while the Bank of Canada has held its rates longer, creating a noticeable economic gap between the two countries that we can leverage in trading.
With the recent U.S. inflation report for November 2025 showing the core CPI dropping to 2.8%, we think the Fed can ease policies further in 2026. Traders might consider using SOFR futures to prepare for at least two more rate cuts by mid-next year. This perspective is supported by recent data showing slower retail sales, indicating that U.S. consumers are starting to pull back.
The U.S. economic slowdown is also increasing uncertainty, leading to greater market volatility. The VIX index has risen from its lows, recently reaching 19 after a disappointing November jobs report showed only 85,000 new jobs. We suggest that buying VIX call options or VIX futures contracts for February 2026 could be a smart way to protect against a potential market decline.
In Canada, the situation looks more defined. Statistics Canada reported inflation for November at just 2.4%, which gives the Bank of Canada a clearer path to reduce rates more aggressively than the Fed. We find value in derivatives that bet on a steeper Canadian yield curve, as short-term rates are likely to drop faster than long-term rates.
This widening gap in central bank policies makes the currency market particularly intriguing. The USD/CAD exchange rate has been hovering around 1.38, but underlying factors suggest further weakness for the Canadian dollar. We believe that buying USD/CAD call options with a strike price of 1.40 expiring in March 2026 is a profitable strategy to take advantage of this divergence.
Euro weakens against strengthening dollar after recent US data impacts earlier gains
The EUR/USD pair pulled back as the US Dollar stabilized after recent economic data from the US. The Personal Consumption Expenditures (PCE) index for September met expectations, keeping inflation outlook steady.
The Euro lost some earlier gains, trading around 1.1635 after hitting a daily high of 1.1628. However, the pair is still on track for its second consecutive weekly gain, with growing expectations for a Federal Reserve rate cut.
