US Economic Data and the Fed in Focus

Later on Monday, US economic indicators are likely to influence US dollar demand and USD/JPY. Pending home sales and the Dallas Fed Manufacturing Index will be in focus. Given the strong third-quarter GDP numbers, the Dallas Fed Manufacturing Index will likely influence sentiment more than housing sector numbers.

Economists expect the Dallas Fed Manufacturing Index to increase from -10.4 in November to -2.5 in December.

A weaker-than-expected Dallas Fed Manufacturing index would signal a loss of economic momentum, weighing on the US dollar.

While the data will influence US dollar demand, Fed commentary will be key. Support for further rate cuts on inflation outlook and a weaker labor market would weigh on the US dollar, pushing USD/JPY lower.

According to the CME FedWatch Tool, the probability of a March Fed rate cut increased from 53.3% on December 26 to 54.8% on December 27.

Looking ahead, the prospects for further BoJ rate hikes, a new Fed Chair, and a deteriorating US labor market are likely to remain the key themes. These scenarios continue to support a bearish short- to medium-term outlook for USD/JPY.

Technical Outlook: USD/JPY on a Downward Trajectory

For USD/JPY price trends, technical indicators, and fundamentals will require close monitoring.

Looking at the daily chart, USD/JPY remained above its 50-day and 200-day Exponential Moving Averages (EMAs), indicating a bullish bias. While technicals remained bullish, fundamentals are outweighing the technical structure, indicating a bearish outlook.

A drop below the 155 support level would bring the 50-day EMA into play. If breached, the 200-day EMA would be the next key technical support level. Crucially, a sustained break below the EMAs would signal a bearish trend reversal, paving the way toward 150.

I wrote on the 21^st December that the best trades for the week would be:

1. Long of the USD/JPY currency pair. This gave a loss of 0.76%.
2. Long of the S&P 500 Index following a daily close above 7,000. This did not set up.
3. Long of Silver with half the normal position size. This gave a win of 8.84%.
4. Long of Platinum with half the normal position size. This gave a win of 11.81%.
5. Long of Gold with half the normal position size following a daily close above $4,355.80. This set up at Tuesday’s close and gave a win of 1.00%.

Overall, these trades gave an amazing gain of 22.41%, which comes to 4.48% per asset.

A summary of last week’s most important data:

1. US Preliminary GDP – this came in much better than expected at 4.3% compared to the anticipated 3.2% and helped boost US stock markets.
2. Canadian GDP – as expected, a monthly contraction by 0.3%.
3. US Unemployment Claims – this was very slightly better than expected.

Last week’s data had little impact except the US GDP data. The market is still pricing in only two Fed rate cuts of 0.25% over the course of 2026.

Of course, last week saw part of the Christmas holiday and as such markets were partially closed or mostly quiet with thin liquidity.

Forex and commodities markets did little, except precious metals, which made spectacular, wild gains. Gold, Silver, and Platinum all gained strongly to make new all-time highs, while Palladium also made strong gains to reach a new 3-year high.

In the USA, the S&P 500 Index broke to a new record high for the first time in several weeks on Christmas Eve, but the gains were nothing spectacular.

The coming week includes the western New Year holiday, which includes public holidays in several major markets on Thursday and Wednesday or Friday in some cases. This will almost definitely mean a much less liquid and active market than usual.

We are likely to see low level of volatility this week, like last week, except perhaps in the precious metals market. There is almost no high-impact data due.

This week’s most important data points, in order of likely importance, are:

1. US FOMC Meeting Minutes
2. US Unemployment Claims

Currency Price Changes and Interest Rates

For the month of December 2025, I made no forecast.

Last week, I made no forecast, as there were no recent excessive moves in currency crosses.

The Australian Dollar was the strongest major currency last week, while the US Dollar was the weakest. Directional volatility fell again last week, with only 7% of all major pairs and crosses changing in value by more than 1%.

Next week’s volatility will almost certainly be at a similarly low level.

You can trade these forecasts in a real or demo Forex brokerage account.

Key Support and Resistance Levels

Last week, the US Dollar Index printed a bearish candlestick which engulfed the real body of the previous week’s candlestick and closed quite near the low of its range. The price action is showing no long-term trend but is showing a short-term bearish trend. Recently, the greenback has been consolidating.

The surprisingly strong US GDP data released last week might be seen to be a reason for the Fed to cut rates less in 2026, but expectations have not changed.

I take no bias on the US Dollar right now. Not much is going on here, so it will probably make sense to consider other assets on their own over the coming week.

US Dollar Index Weekly Price Chart

The AUD/USD currency pair saw the largest move in the Forex market last week, although it was not very large, in relative terms. However, the Aussie is picking up some steam, although the daily price chart below shows that despite breaking a recent swing high, this bullish move may be running out of steam.

What impresses me the most about this currency pair is that its medium and long-term moving averages are starting to point up and gain on a daily chart, meaning this pair is probably a good candidate for a swing trade on the long side followed by a pullback and bounce at a medium moving average on a shorter-term price chart.

There isn’t a lot to say about the US or Australian Dollars in fundamental terms right now, except it is the most interesting thing in an otherwise dull Forex market.

AUD/USD Daily Price Chart

The weekly price chart below shows that this major US stock index gained last week, breaking to a new all-time high, although the move and breakout were not large or strong.

However, the price closed quite near the high, and it makes sense to be long of this index when it is making new record highs and showing even moderately bullish price action. Historically, the odds are in your favour going long here, as new record highs tend to lead to rising prices.

Bears can argue that the market is heavily overvalued and rising due to an AI bubble which will soon burst. Both these arguments are plausible, which is why anyone going long should use a volatility-based trailing stop and proper risk management.

I see technical but not fundamental reasons to be long, along the high US GDP data released last week might be encouraging bullish sentiment.

S&P 500 Index Weekly Price Chart

Silver’s wild, meteoric rise continues. It gained more than 10% just on Friday, more than 17% over the past week (the largest in over 5 years), and almost 60% in the last five weeks alone. The price action is extremely bullish, closing right on the high.

Other precious metals, such as Platinum, are also seeing explosive gains.

It is fair to say that Silver and Platinum are behaving like meme stocks rather than precious metals, although Silver and Platinum, like Palladium, are also industrial metals.

Some analysts argue that Silver is facing supply issues which cannot meet demand. I find this unconvincing as there is always plenty of Silver underground that can be mined if it becomes economical to do so.

Other analysts think some precious metals are gaining dramatically because markets are wary of all fiat currency. However, if this were so, you might expect Gold to be gaining much more dramatically, and Bitcoin might have a bid too – neither are true, Gold rose in an orderly way to a new record high last week.

I think what we are seeing is an end-of-year institutional and retail FOMO (fear of missing out) bubble. Silver may continue to rise, maybe even to $100, and then the bubble will burst, and it will come crashing down.

I think the correct way to approach Silver is to use a volatility-based trailing stop, maybe ATR (100) X3, and a very small position size (say, a quarter of the normal risk by account equity percentage).

Silver Weekly Price Chart

Platinum had its best week last week of all time, rising by more than 23% to exceed its previous record high set in 2008, gaining even more strongly than Silver did.

Everything I have to say about Silver in the section above also applies to Platinum. There is a stronger case that Platinum’s supply disruptions are meaningful and a real factor in pushing the price higher (70% of the world’s Platinum is mined in South Africa). Yet ultimately, it’s essentially a speculative bubble, just like Silver.

Platinum Weekly Price Chart

Gold has made a firm bullish breakout beyond its ascending price channel of recent weeks, closing very near its high and at a record high price too. These are all bullish signs, and precious metals are obviously gaining tremendously as an asset class.

These are all good reasons to be long of Gold and I am. What is most interesting though, is why Gold is gaining so much more slowly than other precious metals like Silver and Platinum?

The only fundamental answer I can think of is that Gold is purely a precious metal, while Silver and Platinum and Palladium are also industrial metal (although Gold does have a few other uses).

I suspect that speculators are just finding it easier to go after other markets than Gold, because so much Gold is held by central banks, who have an interest in calming and slowing the market.

I am long Gold. I have no idea how high it will go but I am happy to use a trailing stop and take the risk of coming along for part of the ride.

Gold Weekly Price Chart

Palladium rose strongly for a second consecutive week, gaining by 13% over the past five days to reach a new 3-year high price.

These are bullish signs, but it is worth noting that the price could not reach the big round number at $2,000 and retreated from that area once it got close to it.

Palladium is a precious and industrial metal and is a much more squeezable market than other precious metals, as it is a far rarer substance than Gold. Most Palladium is mined in South Africa and Russia, and there are legitimate supply issues and fears that are playing a role in driving the price higher.

Everything I have to say about Silver and Platinum in the sections above also applies to Palladium. I think we might see further strong gains here, but I will be long with a small position size and a hard trailing stop.

Paladium Weekly Price Chart

I see the best trades this week as:

1. Long of the S&P 500 Index.
2. Long of Silver with a quarter of the normal position size.
3. Long of Platinum with a quarter of the normal position size.
4. Long of Gold with half the normal position size.
5. Long of Palladium with a quarter of the normal position size.

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Created on December 28, 2025

The GBP/USD started last Monday around the 1.33785 mark and finished on Friday around the 1.34978 ratio. The GBP/USD correlated well to other major currencies which gained against the USD most of last week. Holiday season price action which began last week certainly brought lighter volumes.

Sustained higher values going into the weekend may be looked at suspiciously by some speculators of the GBP/USD, but the currency pair is touching values seen in late August and in September of this year without actually challenging higher apexes. The 1.34978 heights clearly have 1.35000 within sights and financial institutions may have interesting near-term decisions to make in the days ahead leading into the New Year’s holiday.

The GBP/USD did touch the 1.36000 level rather consistently in late August and September of this year. In fact the 1.37000 mark was also penetrated briefly on the 17th of September. That doesn’t mean that the 1.34978 ratio now displayed is cheap, but implies that shifting mid-term outlook which views USD weaker centric price action as a possibility due to upcoming power shifts in the U.S Federal Reserve, may be impacting financial institutions now and the way they are positioning the GBP/USD.

The U.S released a better than expected GDP report last week, but its results were published late, due to the government shutdown a couple of months ago, thus its results are being debated. The Federal Reserve’s next FOMC meeting is in late January and opinion varies regarding what the central bank will do regarding interest rates in the immediate future. However, this Tuesday, yes, while a lot of the financial markets are not paying attention because of being on vacation, the Fed will release its FOMC Meeting Minutes report. The Fed’s publication this week could prove lively reading, because it is known that open disagreements are brewing among the FOMC voting members. Who will be paying attention?

Holiday trading volumes are certainly going to impact the markets this coming week. However, the GBP/USD is one of the most heavily traded currency pairs in the world.

• Forex traders will be active on Monday and Tuesday of this week, while the volumes will not match normal trading conditions, the GBP/USD should be watched along with other major currency pairs.
• Sentiment shifts in Forex regarding the USD may make the first couple of days trading this week worthwhile.
• Volumes will come to a crawl on New Year’s eve and Friday’s price action may be quite quiet too.
• A key barometer may be the 1.35000 level, but traders need to be prepared for possible volatile conditions and the prospect of sudden spikes from large orders that are imbalanced.

The move higher in the GBP/USD mirrored movements in the EUR and other currencies against the USD this past week. Cautiousness the week before, suddenly changed into a more optimistic approach regarding USD centric weakness potential early this past Monday and the sustained move higher didn’t produce a reaction reversal. The lack of a strong reversal, and the ability to easily stay above the 1.34000 level and then the 1.34500 mark is an indication the GBP/USD has traction.

Due to the holiday season and lighter volumes than normal being seen in Forex, traders should remain careful and not get overly ambitious. If the 1.35000 ratio is penetrated and sustained this could indicate financial institutions believe the GBP/USD is within a sincere bullish trend. Speculators aiming for the highs attained in September of this year should not get greedy. The potential for a reactionary bout of selling in the GBP/USD with light volumes prevalent is a danger.

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Created on December 26, 2025

• I suspect that the most likely outcome, at least over the next couple of weeks, might be sideways action as we carve out a 350-pip range or so.
• The US dollar has drifted lower against the Japanese yen during early trading on Wednesday, but it is starting to see a little bit of pushback.
• I believe that the 155-yen level is an area that a lot of people will be watching very closely as it could end up being a bit of a floor, especially with the 50-day EMA sitting just below it.

All things being equal, this is consolidation, but it is also a very high level of pricing that we haven’t seen since the beginning of 2025. So, the question now is, are we bumping into a ceiling? I think it is a little early to suggest that at the moment, but it is a possibility so I will be watching.

Market Volatility and Technical Levels

The 158-yen level is an area that offers significant resistance, but again, the 155-yen region offers significant support. The 50-day EMA, of course, is an indicator that a lot of people watch, and it sits at 154.50 yen, so that all ties together quite nicely.

The Japanese yen had seen a little bit of volatility after the Bank of Japan raised rates last week, but the reality is, I don’t think most of the market likes that, and they may punish Japan for that. I don’t think the market believes that the Japanese can aggressively raise rates anytime soon, while the Federal Reserve at least could make an argument that some of the most recent data have suggested that maybe they have to be very measured in their rate-cutting cycle.

All things being equal, this is a very noisy market, but I believe that it eventually goes looking to the upside. Even if it doesn’t, I would reset somewhere near the 152-yen level and start to look for support there as the 200-day EMA is in that neighborhood.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

Created on December 26, 2025

• The Euro has drifted a bit lower against the Japanese yen during the trading session on Wednesday as we continue to see a lot of noisy behavior.
• All things being equal, this is a market that I think continues to see a lot of upward trajectory and upward momentum.
• The 182 yen level is an area that I think offers a bit of a floor at this point in time, as it had previously been both support and resistance.
• With this being the case, the next support level that we would look at is the 50-day EMA, which sits just above the 180 yen level.

Any pullback at this point in time will more likely than not be interesting for those willing to take advantage of the overall trend, and I do think that it’s only a matter of time before we bounce and go looking to the 185 yen level for a longer-term move.

Interest Rate Differentials and BoJ Policy

Ultimately, the interest rate differential still favors the European currency over the Japanese one, and therefore I think we’ve got a situation where a lot of traders are hanging on to this and collecting that swap at the end of every day. I have no interest in shorting anytime soon, but if we did break down below the 175 yen level, then we would have to think about that.

All things being equal, this is a market that I think remains one that is probably going to move mainly based on the Japanese yen itself, as the Bank of Japan has found itself in a little bit of trouble suggesting that they were going to tighten monetary policy because it appears that the financial markets think that will do nasty things to the Japanese economy, especially considering all of the debt that the Japanese currently hold.

With this and the fact that we’ve been in a nice 45-degree uptrending angle for what seems like a lifetime, I have no interest in shorting, and I do think that we eventually not only hit 185 yen but probably higher.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

Position and Upside Risk

In my view, intervention threats will continue to cap USD/JPY upside at 158. Meanwhile, JGB yields would likely bolster yen demand, indicating a negative price outlook. However, the BoJ’s neutral interest rate will be pivotal, given recent concerns about sticky US inflation.

A higher neutral interest rate level, neither accommodative nor restrictive, would indicate a more hawkish BoJ rate path and a narrower US-Japan rate differential. A narrower rate differential would make yen carry trades into US assets less profitable, reversing yen carry trades, sending USD/JPY toward 140 over the longer term.

However, upside risks to the bearish outlook include:

• Dovish BoJ chatter and a 1% neutral interest rate.
• Strong US data.
• Hawkish Fed rhetoric.

These scenarios would weaken the yen and boost demand for the US dollar, sending USD/JPY higher. However, yen intervention warnings are likely to cap the upside at around the 158 level, based on the latest communication.

Read the full USD/JPY forecast, including chart setups and trade ideas.

Conclusion: Focus on the BoJ Neutral Rate

In summary, USD/JPY trends reflect the Japanese government’s focus on forex markets and changing sentiment toward narrowing rate differentials. Market focus will remain on BoJ Governor Ueda and the Fed’s outlook on monetary policy and the BoJ’s view on the neutral interest rate.

A 1.5% to 2.5% neutral rate would indicate more aggressive BoJ rate hikes, supporting the bearish short- to medium-term outlook for USD/JPY. Furthermore, dovish Fed rhetoric will likely send USD/JPY toward 140 in the 6-12 month time horizon.

For more in-depth analysis, review today’s USD/JPY trading setups in our latest reports and consult the economic calendar.

Created on December 25, 2025

EUR/USD Analysis Summary Today

• Overall Trend: Bullish
• Support Levels for EUR/USD Today: 1.1745 – 1.1680 – 1.1600
• Resistance Levels for EUR/USD Today: : 1.1830 – 1.1880 – 1.1930

EUR/USD Trading Signals:

• Buy EUR/USD from the support level of 1.1690 with a target of 1.1820 and a stop-loss at 1.1600.
• Sell EUR/USD from the resistance level of 1.1840 with a target of 1.1500 and a stop-loss at 1.1900.

Technical Analysis of EUR/USD Today:

With the start of the Christmas holiday season, market liquidity is thinning and investor risk appetite is weakening until full market operations resume. Consequently, the EUR/USD exchange rate is expected to move within narrow ranges today, Thursday, staying close to its recent performance. According to reliable trading platforms, the Euro rose to 1.1807, breaking through a psychological level, before stabilizing around 1.1778 at the time of writing.

Bullish Scenario: The upward momentum for EUR/USD will strengthen if the price stabilizes above the 1.1800 resistance. As previously mentioned, this is the most critical level to watch for an eventual bullish breakout toward the 1.2000 resistance peak. Recent gains on the daily chart are beginning to push technical indicators into overbought territory, as seen in the 14-day Relative Strength Index (RSI) and the MACD.

Bearish Scenario: Conversely, for the “bears” to regain control of the general trend, the pair would need to return to the support vicinities of 1.1660 and 1.1500.

Today, No significant economic data releases impacting currency prices are expected.

Trading Advice:

Analysts at TradersUp advise caution when trading in narrow ranges during the annual holiday season to avoid sudden price gaps that could negatively impact open positions.

Will the Euro appreciate in the coming months?

According to currency trading experts, MUFG Bank anticipates strong support for the Euro. They expect increased demand for the Euro from central banks, which will be a significant driver of its appreciation. Also, the bank sees room for increased purchases of official Eurozone sovereign bonds. He noted that: “The supply of sovereign bonds will increase in Europe, and negative yields are certainly a thing of the past. The supply of EU bonds will also increase. The €90 billion loan deal concluded for Ukraine last week will contribute to improved liquidity and a gradual increase in central bank demand.”

Nordea Bank commented on its European Central Bank interest rate forecast, stating: “We remain satisfied with our current baseline forecast of stable interest rates until the second half of 2027, where we expect the ECB to raise interest rates twice by 25 basis points each time.” It added: “The risk of further interest rate cuts has diminished, although the possibility of another cut has not disappeared entirely.”

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