After rejecting 157.90, USD/JPY finds support above the 50-day average and may experience rangebound movement
The USD/JPY exchange rate has pulled back from resistance at around 157.90 but remains supported above the 50-day moving average of about 154.30. In the near term, the exchange rate may stay within a set range, with a chance for upward movement if it breaks above 156.95.
Recent Resistance and Pullback
Recently, the pair faced resistance near 157.90 in November and has been pulling back since then. Right now, it’s trapped between a low near 154.30 and a high of 156.95 reached earlier in December. If it breaks above 156.95, that could signal a continuation of the upward trend.
Currently, USD/JPY has lost some ground after hitting the 157.90 resistance level in November. The pair is now stable, supported by the 50-day moving average near 154.30, and capped by the early December high around 156.95. In the coming weeks, this range-bound action points towards certain trading strategies.
With the pair moving sideways, one-month implied volatility has dropped to under 8%, significantly lower than earlier this year. This makes selling options appealing, using strategies like iron condors or short strangles with strikes outside the 154.30 to 156.95 range. This approach profits from the pair staying stable through the holiday period.
Implied Volatility and Trading Strategies
Despite the current stability, the overall trend is still upward, largely due to the large interest rate gap. The U.S. Fed funds rate is above 5%, while the Bank of Japan’s overnight call rate, even after a recent hike, is just 0.25%. A clear break above 156.95 should be seen as a signal to buy call options or use bull call spreads to benefit from the next move up.
We should remember the significant interventions by Japan’s Ministry of Finance back in 2024 when the pair crossed the 160 level. While we’re not at those extremes now, a rapid rise toward 158.00 could prompt officials to buy yen again, creating a soft ceiling for the market and raising risks for overly aggressive bullish positions.
The Bank of Japan is tightening its policy, but at a much slower pace than other central banks. Recent data showed Tokyo’s core inflation stayed above the 2% target for the 30th month in November, yet the BOJ remains cautious. This reluctance to raise rates aggressively will likely keep the yen weak and support the dollar.
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After a corrective pullback, the S&P 500 Index seems ready for another upward movement.
The S&P 500 Index (SPX) has finished its recent pullback and is now on the rise. The overall bullish trend is still strong, with the price respecting key support levels, confirming that the pullback has ended.
After reaching a previous high, SPX dipped in wave ((ii)). This decline happened as an A-B-C correction and ended near the 1.618 Fibonacci extension at around 6693, coinciding with blue box support on the chart.
Start of a New Bullish Phase
After stabilizing near the lows, SPX began to increase, signaling the end of wave ((ii)). The index is now entering a new bullish phase in black wave ((iii)), beginning with wave (i) and a small pullback in wave (ii). As long as the price stays above 6519.34, we expect the index to continue in wave (iii), aiming for the 100%-161.8% Fibonacci extension of wave (i), which targets a range of 6854-6914. The Elliott Wave pattern points to further upward movement, signaling the continuation of the larger bullish trend for SPX. It’s not advisable to sell, as any declines should be temporary and will likely find support. With the pullback looking complete, the overall uptrend in the S&P 500 appears ready to continue. The recent low around 6693 has proven to be strong support, and the bounce back is the first indication of a new bullish phase. We are anticipating a sustained upward move, confirming that the market has absorbed recent selling pressure. This positive outlook is supported by favorable economic data. The latest CPI report showed core inflation has eased to 2.1% year-over-year. The Federal Reserve’s neutral comments this week have eased worries about near-term rate hikes. Additionally, the VIX, which measures market volatility, has dropped from recent highs back into the mid-teens, indicating that trader anxiety is diminishing.Trading Strategies
Given the immediate upside target of 6854-6914, purchasing call options seems like a solid strategy. Traders might consider January 2026 expirations to allow enough time for this move to unfold, targeting strike prices around 6850 or 6900. This strategy directly benefits from the anticipated upward trend while clearly defining the risk. For a more cautious approach that generates income, selling out-of-the-money put credit spreads looks promising. By placing the short strike of the spread below recent lows, around the 6600 level, traders can profit from both a rising market and time decay. This strategy fits with the belief that any further dips will be minor and will find support well above the 6519 invalidation point. We saw a similar situation in late autumn 2024 when a quick market dip was followed by a strong rally into the new year. That time demonstrated how buying during a downturn in a strong uptrend can be very effective. This historical example serves as a useful guide for the price action we expect in the coming weeks. Create your live VT Markets account and start trading now.Eurozone’s current account reaches €25.7 billion, exceeding expectations of €19.6 billion
The Eurozone’s current account balance for October was better than expected, coming in at €25.7 billion, compared to the forecast of €19.6 billion. This indicates a stronger economy than predicted.
There were notable changes in the financial markets. The EUR/USD pair moved toward 1.1700, while the GBP/USD remained under 1.3400 after updates from the Bank of England and new US inflation data. Gold traded below $4,350, influenced by a strong US dollar. Meanwhile, Bitcoin, Ethereum, and Ripple saw price corrections due to the Bank of Japan’s recent interest rate decision.
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The European Central Bank has kept interest rates steady for four meetings in a row. This is due to November’s core inflation rate holding steady at 2.3%. In contrast, the Bank of England recently cut rates after confirming the UK’s Q3 GDP growth for 2025 was just 0.1%. This growing difference in monetary policy could weaken GBP/EUR, making it a potentially profitable pair for short positions in the coming weeks. Despite the strong data from the Eurozone, the EUR/USD is influenced by fiscal issues in France, keeping it around 1.1710. France’s proposed 2026 budget faced a warning from the European Commission about its deficit, creating challenges for the Euro. It might be wise to consider hedging long Euro positions with options to protect against possible political fallout. The US dollar continues to show overall strength because the Federal Reserve is not expected to lower rates anytime soon. Even though the latest US CPI for November 2025 was slightly below expectations at 3.0%, it still exceeds the Fed’s target and is far from the sub-2% rates experienced before the inflation rise in 2022-2023. This situation supports holding long dollar positions against currencies from more dovish central banks, like the Australian dollar. Gold remains in a narrow range below $4,350, a significant price considering it was closer to $2,000 just a few years ago. The strong US dollar is limiting its gains. However, the high price indicates ongoing demand as a hedge against inflation. We should be ready to trade a breakout from this stable range since a shift in Fed sentiment could lead to substantial market movements. Create your live VT Markets account and start trading now.Eurozone’s current account declines from €38.1 billion to €32 billion
The Eurozone’s current account has dropped, going from a surplus of €38.1 billion to €32 billion in October. This change indicates lower net inflows compared to last month.
These figures are important for understanding the Eurozone’s financial position in the global market. They help evaluate the economy’s health and its potential impact on monetary policy and market trends.
Impact On Currency Trading
The shift in the current account balance could influence trader sentiment and impact currency trading, particularly the euro’s value against other currencies. Analysts will closely monitor this indicator to assess the Eurozone’s economic conditions. The drop in the current account to €32 billion aligns with a trend we’ve been tracking. It reinforces the perception of a slowing Eurozone economy, supported by recent November inflation figures at a low 2.1%. The strong post-pandemic export recovery seen in 2023 and 2024 seems to be losing momentum. The European Central Bank’s cautious comments in its December 12th meeting are now more significant. In comparison, recent U.S. data, including a surprisingly strong November jobs report, suggests the Federal Reserve is unlikely to cut rates soon. This growing gap in policies between a careful ECB and a strong Fed is putting pressure on the euro. In the weeks ahead, we recommend buying out-of-the-money put options on EUR/USD. This approach offers a cost-effective way to prepare for a potential decline in the currency pair towards the 1.05 level. Since implied volatility has decreased since the fall, option premiums are relatively low.Signs Of Increasing Short Bets
We should also watch futures positioning for signs of rising short bets against the euro. Recent data showed speculative net shorts up by 8%, suggesting that major market players are responding to this weakness. A further increase in these positions would strengthen a bearish outlook as we move into the new year. As winter arrives, attention turns to the region’s energy import costs, which can greatly affect the trade balance. A recent rise in European natural gas futures reminds us of the economic vulnerability from the 2022 energy crisis. Any further energy price shocks could quickly reduce the current account surplus and weaken the euro. Create your live VT Markets account and start trading now.NZD/USD hovers around 0.5750 as renewed USD demand outweighs positive GDP data, attracting sellers.
NZD/USD dropped to about 0.5760 early Friday in Europe. Even with New Zealand’s strong GDP numbers, the Kiwi struggles due to increased demand for the US Dollar.
New Zealand’s GDP grew by 1.1% in Q3, recovering from a 1.0% decline in Q2. Despite this growth, the Reserve Bank of New Zealand is likely to maintain the policy rate at 2.25% until 2026.
US Inflation And Rate Expectations
Recent US inflation data has raised hopes for further interest rate cuts from the Federal Reserve. This may help limit losses for the NZD/USD pair, despite some pressure on the US Dollar. Right now, markets see a 26.6% chance of a US central bank rate cut in January, following three consecutive quarter-point cuts, according to the CME FedWatch tool. The NZD is affected by New Zealand’s economy and the local central bank’s policies. Additionally, China’s economy and dairy prices are crucial due to trade and export needs. The Reserve Bank of New Zealand aims for an inflation rate between 1-3%, ideally near 2%. Changes in interest rates can impact the NZD by affecting investor interest and its strength against the US Dollar.Market Signal And Strategy
The NZD/USD pair is weakening towards 0.5750, despite New Zealand’s solid Q3 GDP growth of 1.1%. This indicates the market is more focused on the interest rate outlook from both the RBNZ and the US Federal Reserve. The gap between strong economic data and a falling currency is an important signal to note. The Reserve Bank of New Zealand has indicated it will keep its interest rate at 2.25%, which caps the Kiwi’s value for the time being. In 2022, New Zealand’s inflation peaked above 7%. The latest Q3 2025 inflation reading of 2.8% supports the bank’s wait-and-see approach. This makes selling NZD/USD call options or taking bearish positions on rallies a solid strategy for the coming weeks. On the other side, the potential for more US interest rate cuts is limiting the US Dollar’s strength. The November 2025 US inflation report showed a cooler-than-expected inflation rate of 2.5%, significantly down from over 3% in 2023. This creates a potential floor for the NZD/USD pair, making it risky to go short and suggesting that selling puts below the 0.5700 mark could be a way to gain premium. External factors also play a role in the Kiwi’s performance, such as the state of China’s economy and dairy prices. Recent data shows China’s manufacturing PMI slightly above 50, indicating weak growth for New Zealand’s biggest trading partner. Additionally, while the Global Dairy Trade index has bounced back from 2023 lows, it remains low, providing little extra support for the New Zealand dollar. Create your live VT Markets account and start trading now.GBP/JPY rises above 209.00, showing continued upward momentum
The GBP/JPY might reach new highs around 210.00. If it breaks this key level, the pair could move towards 213.10, which is the top of the channel. Strong short-term momentum is helping the currency stay on its upward path.
Support And Resistance Levels
If the GBP/JPY faces challenges, its main support is at the nine-day EMA, which is 208.10. Another support level is near the channel’s lower boundary at 207.50. If it falls below the channel, this could harm the upward trend and possibly test the 50-day EMA at 205.10. The Japanese Yen is currently the weakest major currency against the British Pound. The heat map shows percentage changes, with the base currency on the left and the quote currency at the top. The GBP/JPY is climbing above 209.00, confirming a strong bullish trend that we expect to continue. This rise is due to the different monetary policies of the central banks in the UK and Japan. The Pound’s persistent strength indicates that finding ways to join this upward momentum is the best strategy. The Bank of England’s recent increase of its base rate to 5.75% is boosting the Pound’s strength. Recent data for November 2025 shows UK inflation at 3.5%, which is significantly above the target. This contrasts with Japan, which continues its ultra-loose monetary policy.Monetary Policy Impact
The Japanese Yen remains weak because its economy is still facing challenges. For example, a recent report showed that Q3 2025 GDP fell by 0.2%. This disparity makes borrowing Yen to purchase Pounds—a strategy known as the carry trade—very profitable. This fundamental situation supports the technical outlook of an ongoing rise for the currency pair. For derivative traders, this market scenario makes buying call options appealing, especially with strike prices targeting the 210.00 psychological level and the 213.10 channel top. Given the strong upward momentum, selling cash-secured puts at lower levels can also be an option to earn premium. We believe the trend is still upward for now. Historically, this trend has been growing steadily since the gap in policies widened significantly in 2024. Each dip in prices has been met with aggressive buying, and the ascending channel pattern remains intact. The recent move beyond 209.00 confirms this long-term trend. However, we should stay cautious since the RSI is high, suggesting that the rally might be overstretched. A smart strategy would be to hedge long positions by buying put options with a strike price below the crucial 208.10 support level. This would provide protection against any sudden market reversals in the upcoming weeks. Create your live VT Markets account and start trading now.BoJ Governor explains reasons for increasing interest rate at press conference
Bank of Japan (BoJ) Governor Kazuo Ueda announced a 25 basis points increase in the key interest rate, bringing it to 0.75%. This move matches market expectations and marks a 30-year high for short-term rates as part of the policy normalization that started last year.
During the press conference, Ueda mentioned that the BoJ might consider further rate hikes if the economy and prices develop as expected. There are ongoing worries about inflation, particularly with the weak Yen, though uncertainties regarding the US economy and inflation have eased.
Japanese Economic Recovery
Japan’s economy is recovering moderately. The job market is tight, and corporate profits are expected to stay high. Even with the recent rate rise, real interest rates are likely to remain deeply negative, ensuring a supportive monetary environment. The BoJ aims for a 2% inflation target, and wage growth is under constant review, hinting at possible future rate increases. After the rate announcement, the Yen initially gained against the US Dollar, reflecting market reactions to the change. Overall, the BoJ’s adjustments in interest rates are part of a larger plan to support economic stability and keep inflation in check. The Bank of Japan’s decision to raise interest rates to 0.75% was anticipated. As a result, the Yen weakened slightly, with USD/JPY rising above 156.00. This indicates that the market had already expected this increase and may have hoped for a more aggressive policy. We should now look at the forward guidance, which suggests more rate hikes could occur if economic conditions permit.Future Rate Hikes
Governor Ueda’s remarks indicate that additional rate increases are likely, creating a period of uncertainty for a currency used to stable, low rates. This means we could see increased volatility in Yen trading pairs in the coming weeks. Considering strategies that profit from larger price swings may be wise, as the time of predictable Yen weakness appears to be fading. The differing policies between Japan and the United States will be a key focus going forward. While Japan is tightening its regulations, recent comments from the US Federal Reserve suggest possible rate cuts by 2026, as inflation there cools. This change in interest rates should, over time, support a stronger Yen. It’s essential to keep an eye on the data the BoJ is monitoring. Japan’s national core CPI for November 2025 was 2.7%, still above the 2% target, and early forecasts for the 2026 “Shunto” wage negotiations indicate strong pay increase demands. A solid wage agreement at the start of next year would likely trigger the next rate hike from the central bank. Looking back at how markets reacted when the BoJ changed its yield curve control policy in 2023, we saw a mix of initial volatility followed by stabilization. Given that real interest rates in Japan remain deeply negative even after the recent hike, further normalization seems likely. Therefore, it might be prudent to position for long-term Yen strength, viewing current USD/JPY levels above 156.00 as a potential opportunity. Create your live VT Markets account and start trading now.UK retail sales fell by 0.1% month-over-month, against an expected increase of 0.4%
UK Retail Sales dropped by 0.1% in November compared to October, which saw a 0.9% decline, according to the Office for National Statistics. This was unexpected, as analysts had predicted a 0.4% rise.
Core Retail Sales, excluding auto fuel, fell by 0.2% in November, following a previous drop of 0.8%. Experts had forecasted a 0.2% increase.
Annual Retail Sales Performance
Year-over-year, UK Retail Sales increased by 0.6% in November, the same as the previous month, but below expectations of 0.9%. Core Retail Sales rose by 1.2%, short of the anticipated 1.6%. Following this report, the Pound Sterling slightly weakened, trading at 1.3380 against the US Dollar, up 0.01%. It is currently the weakest among major currency pairs. The British Pound, used since 886 AD, is one of the oldest currencies. It is the fourth most traded in the world, accounting for 12% of all foreign exchange transactions. The Bank of England’s monetary policy significantly impacts its value, primarily using interest rates to manage inflation. We see clear signs of a struggling UK consumer, which will influence our strategy in the coming weeks. The unexpected 0.1% decrease in retail sales for November confirms that the previous month’s weakness was not a fluke. Weak demand during this vital Christmas period could indicate a potential economic slowdown.Bank of England’s Challenges
This consumer weakness occurs alongside persistent high inflation, which was reported at 2.8% for November. Although lower than before, this rate is still well above the Bank of England’s 2% target. The economy is stagnant, with October’s GDP figures showing no growth at 0.0%. The Bank of England finds itself in a tough spot. They decided to hold interest rates at 5.0% because lowering rates could worsen inflation, while raising them could further damage an already weak economy. This dilemma creates significant uncertainty for the Pound Sterling. For derivative traders, the clash between weak growth and high inflation suggests that implied volatility on the Pound may be underestimated. We should consider strategies, like long straddles on GBP/USD, to profit from price fluctuations before new data releases. The market’s uncertainty about the Bank of England’s next steps could lead to sharp reactions. The risks appear to favor a further decline in the Pound. Given the weak consumer data, we may want to buy GBP/USD put options as a hedge against more sterling weakness. This situation reminds us of late 2023 when recession fears pressured the Pound even as the Bank of England kept rates high. In the coming weeks, we need to monitor any flash purchasing managers’ index (PMI) data for December and preliminary holiday sales reports. These will be key indicators of whether consumer weakness from November persists. Any further negative surprises could lead to increased betting against the Pound. Create your live VT Markets account and start trading now.Governor Ueda’s remarks lead to ongoing intraday losses for the Japanese Yen
The Japanese Yen (JPY) is experiencing losses today after comments from Bank of Japan (BoJ) Governor Kazuo Ueda. He indicated that the current loose monetary policy helps the economy recover and that real interest rates will likely stay low. This has lowered expectations for more BoJ rate hikes in 2026, impacting the JPY. Additionally, the positive outlook in equity markets is diminishing the JPY’s appeal as a safe-haven currency, helping the USD regain strength towards the mid-156.00s.
The BoJ recently raised the short-term interest rate by 25 basis points to 0.75%, marking the highest rate in 30 years, but this did not help the JPY. They expressed willingness to raise rates further if the economy performs as expected. Japan’s statistics show that the National Consumer Price Index increased by 2.9% year-on-year in November, with the core CPI steady at 3%, above the BoJ’s goal. Concerns about Japan’s large government debt may also be putting pressure on the JPY.
US CPI and Japanese Currency Dynamics
In contrast, US CPI data revealed a 2.7% increase in November, which was below expectations. This suggests inflation is cooling, possibly leading to Fed rate cuts by 2026. Traders are keeping an eye on the BoJ’s actions and US economic data, including existing home sales and consumer sentiment, to understand currency movements. The USD/JPY pair may not change much this week, but technical analysis hints at possible movement based on price levels. Given the Bank of Japan’s cautious stance, we foresee continued Yen weakness in the near future. Governor Ueda’s remarks indicate that despite the rate hike, the overall policy remains relaxed, likely keeping pressure on the currency. The market sees this not as a move towards tightening but as a minor tweak within a generally supportive policy. The interest rate difference between the US and Japan remains crucial, making the carry trade appealing. With US rates at 3.75% and Japan’s at 0.75%, the 300-basis-point gap encourages selling the Yen and buying the Dollar. Recent data from the CFTC shows that speculative net short positions against the Yen are near multi-year highs, indicating many traders are positioned for this outcome.Technical Level Watching and Associated Strategies
While US inflation was softer at 2.7% last month, the market quickly moved on, focusing instead on the BoJ’s unwillingness to signal more rate hikes. This suggests that the USD/JPY has an upward trajectory, especially since the pair remains above the 156.00 level. Traders should look for buying opportunities during dips as long as the divergence in central bank policies continues. For derivative traders, the conflicting signals from central banks could raise market volatility as we approach the new year. Current one-month implied volatility for USD/JPY is around 9.5%, which seems low given the potential for policy surprises in early 2026. Buying call options with a strike price near 157.00 could be an efficient way to profit from a possible upward move. The key technical level to watch is the 155.30 zone, which previously acted as resistance and should now provide support. A drop below this level could indicate a short-term shift, making put options a suitable strategy to hedge against a decline. However, the overarching trend is influenced by Japan’s significant government debt, which has historically weighed on the Yen. Create your live VT Markets account and start trading now.Germany’s Producer Price Index for November fell to 0% instead of the expected 0.1% month-on-month.
Germany’s Producer Price Index (PPI) for November stayed the same compared to October, showing no change at 0%. This result was below the expected rise of 0.1%.
The PPI tracks the average change in selling prices that domestic producers receive for their products. When the PPI is stable, it means that producers haven’t faced increased costs during this time.
