EUR/USD experiences slight losses around 1.1765 amid market quietude, with focus on the Fed
The EUR/USD is currently trading at around 1.1765, experiencing slight losses in a calm market leading up to the New Year. The Euro faces challenges due to geopolitical tensions, which are holding back its growth, but it still finds support near recent highs around 1.1800.
The US Dollar is at its weakest in nearly a decade. Differences in monetary policy are driving this trend. A nearly 14% increase in the EUR/USD pair is predicted for 2025, thanks to the contrasting approaches of the European Central Bank (ECB) and the US Federal Reserve (Fed), which is expected to cut rates next year.
During European trading, the pound holds steady near 1.3500 against the US dollar, close to recent highs.
**Pound Sterling and US Dollar Dynamics**
US stocks are showing some cautious optimism, while other currencies like the JPY remain strong. Gold is trying to recover to $4,400 after recent losses, partly due to higher margin requirements.
Tron (TRX) is holding steady above $0.2800, just under the 50-day EMA. Economic and crypto forecasts for 2026 are positive, anticipating resilience and growth, influenced by various market factors.
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**Positioning for Market Volatility**
Currently, the Pound Sterling is facing strong resistance around 1.3500 against the dollar. With low trading volumes during the holidays, the market is quiet before the Federal Reserve’s December meeting minutes. This moment is crucial, as a breakthrough or a rejection at this level is likely in the early weeks of the new year.
The upcoming Fed minutes are a key focus. US core inflation has remained steady, around 3.1%, in the final quarter of 2025. The last jobs report for November revealed a strong labor market, adding 185,000 jobs, which supports the Fed’s firm approach. Therefore, any signs of continued hawkishness in the minutes could strengthen the dollar and drive GBP/USD lower.
In contrast, the Bank of England is suggesting a different approach, mentioning “cautious easing.” This follows the UK’s inflation rate for November 2025, which hit 2.5%, nearing the Bank’s target, while third-quarter GDP remained flat. This difference in central bank policies is likely to influence the currency pair.
For derivative traders, this situation calls for a volatility strategy before the Fed minutes are released. One effective approach could be buying a short-dated straddle on GBP/USD, with options expiring in mid-January 2026. This position can profit from significant price movements in either direction, which is expected once the market assesses the Fed’s detailed outlook.
Traders with specific views should consider simple put or call options to manage their risk. If you expect the Fed’s tone to be more aggressive, buying puts on GBP/USD could be profitable. On the other hand, if you think the market has already accounted for a hawkish Fed, call options might benefit from any unexpectedly softer language.
It’s important to note that we are transitioning from a period of low liquidity, and volatility is likely to increase sharply. Historically, the first major data releases of the year lead to significant market moves, as seen in early 2024 and 2025. This pattern suggests we should brace for a decisive move away from the current 1.3500 level soon.
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XAG/USD rebounds to $75.00 after a 7% decline amid geopolitical tensions and thin liquidity
Silver has recently risen to around $75.00 after bouncing back from a low of $70.40. This time of year often sees increased price swings due to lower trading activity. Resistance is likely to occur above the $75.00 level.
On Monday, the silver market fell by 7% because of these thin trading conditions, but it’s now on the mend. Global tensions and expectations for the U.S. to loosen monetary policy in 2026 are helping to boost precious metals.
Russia has revisited peace talks with Ukraine after a drone incident at President Putin’s residence. Meanwhile, military activities around Taiwan continue, and former President Trump has made threats against Iran.
The latest Federal Reserve meeting minutes are expected to show differing opinions, raising hopes for interest rate cuts beyond the predicted 25 basis points.
On a 4-hour chart, silver is trading at $75.65, with support from a 50-period SMA around $70.89. Indicators are mixed; the MACD is below the Signal line, but the RSI is showing bullish signs.
A bearish trend could hint at a more significant correction, with resistance levels at $76.50 and $80.00. Support might be found at the $70.53 level and December’s low of $64.75.
Silver, while less popular than gold, is still used as a store of value, a means of exchange, and an inflation hedge. Its price is influenced by geopolitical events, Federal Reserve actions, and industrial demand. Silver’s use in electronics and solar energy can push prices higher. Its movements often mirror gold, affected by the Gold/Silver ratio.
We’re seeing swift movements in silver, which has returned to the $75.00 area after a quick dip around $70.40. This volatility is common at year-end due to lower trading volumes. Traders should be ready for exaggerated price changes based on news.
Rising global tensions are creating a strong demand for precious metals. Ongoing friction in Eastern Europe and military posturing in the South China Sea are driving traders toward safe assets like silver. This climate makes shorting silver risky, as new headlines could cause another sharp price jump.
Adding to the positive outlook is the anticipation of a dovish Federal Reserve in 2026. With core inflation down to 2.5% in Q3 2025, markets expect at least two rate cuts in the first half of the new year. A weaker dollar and lower borrowing costs increase the appeal of holding silver, a non-yielding asset.
Technically, the outlook is mixed, with conflicting signals and a potential bearish pattern forming on the daily chart. Given the high volatility, traders might consider strategies that manage risk, such as buying call spreads to target the psychological barrier of $80. This strategy allows participation in upside potential while limiting losses if prices drop sharply.
We cannot overlook the strong industrial demand for silver, which supports a long-term bullish view. After record consumption in the solar and EV sectors in 2023 and 2024, projections for 2026 indicate this trend will continue as global green energy initiatives speed up. This underlying demand could soften any price declines and reinforces the case for a long-term investment in silver.
Yen strengthens slightly against the Euro with low trading volumes as year-end holidays approach
The Japanese Yen is gaining strength as people expect more interest rate hikes in Japan by 2026. The Bank of Japan (BoJ) believes its current policy is too lenient due to ongoing inflation concerns. Meanwhile, the Euro isn’t dropping sharply because the market is cautious about the Eurozone’s monetary policy.
EUR/JPY is trading close to 183.50, with a small drop of 0.15% as the year-end holidays approach and trading is quieter. The Yen is strengthening because the BoJ is sending clearer signals about its policies.
Japanese Yen on the Rise
Minutes from the BoJ’s December meeting show that board members agree on the need for more monetary tightening. The BoJ increased its policy rate by 25 basis points to 0.75%. This is the highest rate in 30 years. Governor Ueda stressed the need to normalize monetary policy to address tight labor markets and changing prices. Low interest rates in Japan, coupled with rising inflation, have weakened the Yen. This has prompted calls for more adjustments. Finance Minister Satsuki Katayama indicated readiness for currency market interventions. The Euro’s decline is limited due to the market’s view that the European Central Bank (ECB) may be nearing the end of its rate-cutting cycle. Interest rates have not changed, and there is less than a 10% chance of a rate cut in February. The ECB prefers a cautious, data-driven approach, reviewing policy at each meeting. With the BoJ’s strong stance, the Yen is likely to appreciate in the coming weeks. The BoJ’s recent Summary of Opinions supports the idea of more rate hikes in 2026 to tackle inflation and a weak currency. This shift to a more hawkish policy is a key factor in our strategy.Looking Ahead for Yen and Euro
Data backs up this view, making the BoJ’s position credible. Japan’s national core CPI for November 2025 was at 2.9%, which means inflation is still above the 2% target. Additionally, wage negotiations resulted in average pay increases of over 3.1%, the highest in decades, which will contribute to price pressures. This signals a major policy shift for Japan after years of deflation. Interest rates are at a 30-year high, marking a significant change from the zero-interest-rate policies that dominated since 1995. This new approach suggests that the Yen’s long-term downward trend may finally be reversing. On the flip side, the Euro’s decline is limited, but it also lacks strong reasons for gains. The Eurozone’s HICP inflation for November 2025 was a steady 2.5%, while Q3 GDP growth was sluggish at 0.1%. This situation keeps the ECB from changing rates right now, making the Euro more vulnerable against a stronger Yen. For those trading derivatives, this outlook favors bearish positions on the EUR/JPY pair. Buying put options that expire in late January or February 2026 could benefit from a possible decline towards the 180.00 level. This strategy allows for defined risk, which is smart as trading volumes return to normal after the new year. As market liquidity returns in January, this downward trend may speed up. The next BoJ policy meeting will be crucial, and any further hawkish statements could trigger the next drop. Thus, early January positioning is vital to take advantage of this anticipated move. Create your live VT Markets account and start trading now.Pound Sterling holds steady around 1.3500 against the US Dollar during the European session
The Pound Sterling is stable at about 1.3500 against the US Dollar as we wait for the FOMC minutes. Expectations suggest the Fed will cut interest rates by 50 basis points in 2026. Last time, they reduced rates to a range of 3.50%-3.75%.
There is only one expected cut in 2027, keeping rates lower than previously thought. On Tuesday, the Dollar Index is around 98.00, which tracks the USD against six other currencies. President Trump will announce a new Fed Chair to replace Powell in January, likely favoring easier monetary policies.
Bank Of England’s Monetary Policy
The Bank of England (BoE) has cut rates to 3.75% and indicated that further gradual reductions may follow, as UK inflation fell to 3.2% in November. Labor market conditions and GDP growth in 2026 will influence BoE decisions. Meanwhile, labor demand in the US has weakened, affecting hiring due to higher social security contributions. Currently, GBP/USD is at 1.3506, facing potential resistance at 1.3623. The price has surpassed the 61.8% retracement level, hinting at more possible gains. The FOMC minutes will shed light on future US interest rate policies, impacting market reactions because news outlets won’t have early access. With the Pound Sterling steady around 1.3500 against the US Dollar, we focus on tonight’s FOMC minutes. There’s a clear gap between market expectations for a 50 basis point cut in 2026 and the Fed’s forecast of just one cut. We anticipate volatility, as these minutes might either confirm the market’s dovish outlook or support the Fed’s cautious stance. In this context, we see potential in short-term options strategies for the GBP/USD pair. If the minutes include dovish hints of quicker cuts, buying call options with a target near 1.3600 would be wise. On the other hand, if the tone is hawkish and highlights inflation concerns, put options could help guard against a pullback as the dollar strengthens.Federal Reserve Chair Announcement
Looking ahead to January, the key event will be the announcement of the new Federal Reserve Chair. President Trump wants a leader who supports aggressive easing, which leans toward a dovish outlook for the dollar. This means any strength the US Dollar gains from tonight’s minutes may be short-lived, creating a selling opportunity in the following weeks. On the other side, the Bank of England’s cautious stance is essential. UK inflation is now at 3.2%, a notable improvement from the double-digit highs seen in 2022-2023, but still above the 2% target. This persistence is why the BoE is lowering rates more slowly than the Fed, which supports the Pound Sterling. We will closely monitor UK labor and GDP reports in early 2026 for direction. Strong UK economic data would strengthen the BoE’s cautious stance and could push GBP/USD higher, particularly if US political events lead the Fed to make more aggressive cuts. We have seen how differing central bank policies can drive currency trends throughout 2024 and expect this trend to continue. Technically, there is still room for GBP/USD to rise cautiously. This pair has steadily improved throughout 2025, moving away from the lows of previous years. After breaking the significant 1.3491 level, the next major resistance is around 1.3623. We expect dips to find support, creating buying opportunities as we enter the new year. Create your live VT Markets account and start trading now.M3 money supply in India decreased from 9.9% to 9.3% in December.
India’s M3 money supply fell from 9.9% to 9.3% as of December 8. This decline may affect various aspects of the economy, such as inflation and interest rates, signaling less liquidity overall.
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Drop in Money Supply
The recent decline in India’s M3 money supply growth to 9.3% indicates tighter liquidity in the financial system. With less money circulating, economic growth could slow down. Traders should revise their strategies for the first quarter of 2026 to reflect this slowdown. This contraction in money supply likely stems from ongoing inflation. The November 2025 Consumer Price Index (CPI) showed an inflation rate of 5.8%, well above the Reserve Bank of India’s target. The RBI maintained its key repo rate at 6.5% during its last meeting of 2025, showing its commitment to control inflation. As a result, any expectations for a rate cut in early 2026 might be premature. For those trading equity derivatives, this situation suggests caution regarding Indian indices like the Nifty 50. With tight liquidity and high interest rates, borrowing costs for companies rise, potentially impacting stock prices. This may be a good time to consider strategies that profit from sideways or downward market movements, such as selling out-of-the-money call options.Impact on Currency Markets
In currency markets, higher interest rates usually support the Indian Rupee. However, the slowdown in money supply suggests weaker economic growth ahead, which may limit the Rupee’s strength against the US dollar. Options traders could consider strategies that anticipate the USD/INR pair will stay stable in the coming weeks. We’ve seen this pattern before in late 2023, where a similar slowdown in money supply growth led to market consolidation. This historical trend indicates that the start of 2026 may see lower volatility and range-bound trading instead of strong directional movements. Now is a crucial time to reassess investment in high-growth assets. Create your live VT Markets account and start trading now.USD/CHF pair declines to about 0.7880 during European trading, signaling a bearish trend.
Understanding FOMC Minutes
The USD/CHF pair is trading around 0.7880, down 0.12% during the European session, as the market waits for the Federal Open Market Committee (FOMC) minutes. The US Federal Reserve recently lowered interest rates by 25 basis points to a range of 3.50%-3.75%. With the US Dollar Index around 98.00, traders are cautious ahead of the release. The FOMC minutes, coming out in a low-volume trading week, are essential for understanding the Federal Reserve’s future monetary policy. The Swiss Franc is stable, but there is some uncertainty regarding the Swiss National Bank’s 2026 plans. Technical analysis shows USD/CHF trading below the 20-day Exponential Moving Average (EMA) at 0.7940, indicating a bearish trend. The 14-day Relative Strength Index (RSI) is at 35.63, reflecting weak momentum. FOMC minutes are a crucial economic indicator that gives insight into US monetary policy and its potential effects on currency markets. Traders closely examine these minutes for hints about future policy, affecting the US Dollar’s movement based on whether the tone is seen as bullish or dovish. The financial community eagerly awaits this information for strategic decisions. As we approach December 30, 2025, the USD/CHF pair is weak around 0.7880. The focus must be on the upcoming release of the Federal Reserve’s December meeting minutes, especially after the recent interest rate cut to 3.50%-3.75%. Trading volumes are very low right now, which is typical for the end of the year during major holidays. In these low-liquidity situations, significant news from the FOMC minutes can lead to sharp price shifts. Historical data suggests that volatility in major currency pairs can jump over 30% during this time due to unexpected news.Strategy in Low Liquidity Conditions
With the bearish trend in mind, we should consider buying put options on USD/CHF. This strategy lets us profit from a potential drop in the pair’s value, targeting the multi-year low of 0.7830. The risk in this trade is limited to the premium paid for the option, providing a defined-risk approach during an uncertain week. The Fed’s dovish outlook is backed by recent economic data, which will likely be included in the minutes. For instance, the latest U.S. Core PCE Price Index, the Fed’s preferred measure of inflation, fell to 2.8% year-over-year in November. Additionally, job growth has slowed, with recent Non-Farm Payrolls showing a modest increase of 165,000, further supporting the case for lower rates. Conversely, the Swiss National Bank poses a wildcard, adding uncertainty to the Franc’s future. Although Swiss inflation is lower than in other nations, it stood at 1.5% in the latest report, which might prevent the SNB from signaling rate cuts soon. The contrasting policies of the Fed and SNB add more downward pressure on the USD/CHF pair. The technical picture reaffirms this bearish outlook, as the price remains below the 20-day EMA at 0.7940. This level serves as key resistance; if the price fails to break above it, it indicates that sellers still dominate. For option traders, strike prices below 0.7850 for January expirations appear increasingly appealing. Looking back, we saw a similar downward trend in 2023, with the pair declining from above 0.9400 to below 0.8400. This was driven by changing expectations about Fed policies versus the actions of the SNB. Historical patterns suggest that once these trends take hold in USD/CHF, they can be powerful and persistent. Create your live VT Markets account and start trading now.The Canadian dollar remains stable while the US dollar struggles to break the 1.3700 barrier.
USD/CAD has bounced back from 1.3640 but struggles to go beyond 1.3700. A slight rise in oil prices helps the Canadian Dollar (Loonie), while traders keep an eye on the upcoming Fed meeting minutes.
Recently, the US Dollar moved up from five-month lows near 1.3640 against the Canadian Dollar, but any gains are capped below 1.3700. The Fed’s potential rate cuts in December continue to influence market views.
Fed Meeting Minutes and Market Outlook
The Fed’s meeting minutes are expected to reveal differing opinions among members, which could support predictions of significant rate cuts by 2026. Additionally, President Trump plans to nominate a new Fed Chairman who supports reducing rates. In 2025, the US Dollar has dropped by 20% against the Canadian Dollar due to a weaker economic outlook and different monetary policies from the Fed and the Bank of Canada (BoC). Canada’s main export, oil, has seen a small price increase due to geopolitical tensions, easing fears of overproduction. Key elements affecting the Canadian Dollar include BoC interest rates, oil prices, economic performance, inflation, and trade balance. Higher interest rates, rising oil prices, and strong economic data can strengthen the CAD, while the US economy’s health and market mood also matter. With USD/CAD struggling to remain above 1.3640 and failing at 1.3700, this seems to be a temporary stall in a larger declining trend for the pair. The focus is on the Fed’s meeting minutes coming out later today, which may confirm the market’s dovish expectations. A hawkish surprise appears unlikely based on recent data.Impact of US Economic Data on Future Rate Cuts
We expect these minutes to showcase notable internal disagreements, reinforcing the belief that more rate cuts are likely in 2026. This view is supported by preliminary Q4 GDP data from the US, which showed a disappointing 1.2% annualized growth. A weakening economic outlook gives the Fed strong reasons to keep easing policy. Political pressure from President Trump to choose a new Fed Chair who advocates for aggressive rate cuts weighs heavily on the US Dollar. This uncertainty makes it challenging to argue for any lasting dollar strength as we enter the new year. Traders should see any upward movements toward 1.3700 as chances to prepare for further declines. On the other hand, the Canadian Dollar remains relatively strong. Canada’s November inflation rate came in at 2.9%, keeping the Bank of Canada from considering rate cuts for now. This growing gap between a dovish Fed and a steady BoC is a major driver of USD/CAD weakness. Support for the Loonie also comes from oil prices, with WTI crude staying above $85 a barrel. Ongoing sanctions on Russia and Iran are tightening global supply forecasts for 2026, providing solid support for crude prices. As Canada’s main export, strong oil prices are beneficial for the Canadian economy and its currency. With the US Dollar already down nearly 20% against the Canadian Dollar in 2025, it seems likely to continue lower. We recommend traders adopt strategies that capitalize on this trend, such as buying put options on USD/CAD or selling futures during rallies. Watch closely for a break through the recent low of 1.3640. Create your live VT Markets account and start trading now.The Japanese yen strengthens slightly, leading to a dip in USD/JPY as the Fed Minutes are awaited
USD/JPY is declining as the Bank of Japan (BoJ) tightens its monetary policy, boosting the Yen’s value. The pair is trading at about 155.80, down 0.15%. This drop reflects increased Yen strength after the BoJ’s policy meeting summary in December.
BoJ officials are considering more tightening measures, with some suggesting further rate hikes. The policy rate has been raised by 25 basis points to 0.75%, the highest level in three decades, as inflation approaches the 2% target.
Japan’s Financial Strategy
Japan’s Finance Minister Satsuki Katayama has expressed flexibility regarding JPY movements, hinting at possible interventions. Meanwhile, the US Dollar (USD) is uncertain as the markets await the Federal Open Market Committee (FOMC) Minutes following a recent rate cut. President Donald Trump is set to announce the new Fed Chair, impacting USD expectations. As year-end trading volumes decrease, expectations for BoJ rate hikes in 2026 support the JPY, influencing the USD/JPY pair. The table shows percentage changes among major currencies, with the USD facing mixed adjustments. Notably, the USD has minor declines against several currencies, shedding light on broader market dynamics. As the Bank of Japan signals more rate hikes for 2026, we can expect continued strength in the Japanese Yen. There is a clear policy difference, as the Federal Reserve has already implemented three rate cuts in 2025. This economic backdrop supports a bearish outlook for the USD/JPY pair.Impact of Central Bank Decisions
The BoJ’s decision to raise the policy rate to 0.75% is an important shift, moving away from the negative interest rate policy that has been in place for nearly a decade. With Japan’s core inflation at 2.3% in November 2025, the BoJ has solid reasons to continue tightening. This situation is a stark contrast to 2022-2023 when a weak yen was a major concern. Conversely, the Fed’s current theme is moving towards easing. The federal funds rate is now at 3.50%-3.75%, significantly lower than the 5.25%-5.50% peak we saw in 2023. With the latest US Core PCE inflation down to 2.5%, the market expects a continued dovish approach. In the upcoming weeks, we see value in positioning for a lower USD/JPY, possibly targeting around the 152.00 level. Buying put options on USD/JPY may be a wise strategy, offering a way to capitalize on further Yen appreciation with defined risk. With thinner holiday trading volumes, there’s a chance to enter these positions before activity picks up in January. However, we need to stay alert to upcoming events, starting with the FOMC minutes due later today. Any unexpectedly hawkish comments could lead to a short-term spike in the US Dollar. The announcement of Jerome Powell’s successor in January is another significant factor that may reshape expectations for US monetary policy in 2026. Create your live VT Markets account and start trading now.Gold looks to recover around $4,300 after a 4% decline due to negative market sentiment.
Gold prices fell over 4% from their all-time high of $4,555, finding support around $4,300. This drop was caused by low trading volumes and rising geopolitical tensions, particularly Russia’s changing stance on peace discussions with Ukraine.
China increased military exercises near Taiwan, and potential US actions regarding Iran’s nuclear program also affected market sentiment. These geopolitical events have influenced the US Dollar and precious metals, alongside insights from the Federal Reserve’s meeting minutes, which helped shape economic discussions.
