S&P 500 Holds Record Highs

The S&P 500 continues to grind higher, holding near fresh record highs despite thin holiday liquidity.

The backdrop remains supportive but not euphoric. Markets are leaning on expectations of steady economic growth and a more accommodative Fed over time. Strong Q3 GDP growth (4.3% YoY) reinforced the resilience of the U.S. consumer.

At the same time, there are concerns that AI capex expectations may be stretched and have capped upside, muting a full-blown Santa rally. With volumes still light, price action is being driven more by positioning and sentiment than fresh conviction.

- Alan

AUD/USD Breaks Higher as Yields & Commodities Do the Heavy Lifting

AUD/USD pushed through resistance at 0.6700 and is now consolidating within that zone. A clean break and hold above could open the door for trend continuation and fresh highs.

AUD/USD is supported by a steady rise in Australian yields and strong commodity tailwinds. Markets are increasingly pricing the risk of RBA tightening in 2026, helping keep rate differentials supportive for the Aussie.

Record highs across key commodities like gold, silver, and copper are adding fuel, reinforcing Australia’s leverage as a major exporter. With 10-year yields pushing toward 4.75%, the macro backdrop continues to favor AUD strength near-term, keeping AUD/USD well bid as the year gets underway.

- Alan

Metals Are A Roller Coaster

Silver just came off an extreme move — ripping more than 10% in a single session to tag $83, before pulling back to around $72, a ~9.5% retracement.

Both metals pulled back as traders locked in profits near record highs, while a slight easing in geopolitical risk reduced immediate safe-haven demand. Comments around potential progress in Ukraine peace talks took some premium out of gold in particular.

Zooming out, the bigger trend hasn’t changed. Gold is still up roughly 70%+ on the year, supported by softer Fed expectations, dollar weakness, geopolitical risk, and central bank buying. Silver continues to outperform, up ~180% YTD, driven by supply constraints, industrial demand, and its designation as a U.S. critical mineral.

Markets are now watching the Fed’s December meeting minutes. With two rate cuts priced next year, the macro backdrop remains supportive for non-yielding assets — but any hawkish surprise could trigger further short-term volatility.

- Alan

Gold tends to be bullish, following a large 1 day drop.

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Rising Japanese Yields Shift the Risk Profile for USD/JPY

Japan’s 10-year yield pushing above 2% reinforces the idea that the BoJ is still on a gradual tightening path. December meeting discussions showed policymakers debating further hikes.

While inflation has cooled — Tokyo CPI eased back to ~2% — officials are focused on anchoring expectations and avoiding renewed yen weakness. Also, massive fiscal spending plans for 2026 are adding upward pressure to long-end yields, tightening financial conditions whether the BoJ wants it or not.

USD/JPY implications:
Higher JGB yields narrow rate differentials, which should be structurally supportive for JPY over time. However, as long as hikes remain slow and cautious, USD/JPY can stay elevated and volatile. The risk is asymmetrical:

- Sharp USD/JPY spikes raise the probability of verbal or direct intervention, especially if driven by yield-driven moves rather than fundamentals.

- Gradual JPY strength via yields is healthier and reduces intervention risk.

- Alan

Possibilities for the Pound

GBP/USD is ranging near recent highs in thin holiday conditions. A break below 1.3470 would likely open the door for a deeper pullback, while holding above keeps the broader bullish structure intact.

GBP has been steady against the dollar, with little fresh news to drive price. The dominant driver remains the BoE decision earlier this month, where policymakers delivered a rate cut but signaled that the pace of easing could slow further — that has helped keep GBP supported.

That said, the medium-term picture is more mixed. With the UK labor market weakening, expectations are building for lower inflation ahead, which could give the BoE room to cut more aggressively than markets currently price. Some see as many as three cuts in 2026, a reminder that while GBP is supported near term, longer-term risks still lean dovish.

GBP/USD 1H (left) | 1D (right):
Above recent highs → trend stays elevated

Below 1.3470 → higher-timeframe pullback toward 38.2% / 50% / 61.8% retracements

- Alan

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Yesterday was a rare occurrence (gold drops by over 4% in 1 day).

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Silver Wraps Up 2025 With a Bang

Silver has been on a roller-coaster — a sharp rally, a violent pullback, another surge, and now another reversal. A tricky asset to trade in the short-term.

Price dropped 5% to ~$72 after tagging a record $86.62, as traders locked in profits into year-end. Even with the pullback, silver is still up 150%+ YTD, massively outperforming gold and shaping up for its strongest year on record.

The bigger picture hasn’t changed.

Silver is supported long-term by:
- Structural supply constraints, low inventories, and its designation as a U.S. critical mineral
- Strong industrial + investment demand, and expectations for Fed easing in 2026
- EdgeFinder strong bullish reading

Short-term price action is noisy — but the macro and structural backdrop remains intact.

- Alan

Kiwi's Rate Path is Mixed

The kiwi is closing out the year relatively steady near 0.576, holding onto modest annual gains versus the dollar. The Kiwi finished the year ~3%+ YTD while the Dollar ended ~10%- YTD. Earlier optimism around a possible rate hike next year gave NZD some support, but that narrative didn’t last.

The RBNZ has likely finished its cutting cycle after an aggressive 225bp of easing, but the new central bank leadership has pushed back hard against near-term hike expectations — a shift that weighed on the kiwi. Markets now see little chance of a hike before mid-2026, with July priced at ~40% and September closer to 70%, while a rate cut is fully priced by October.

NZD is stable, but conviction is lacking as policy expectations have been pushed further out.

As the final chart markup of 2025, it was truly a pleasure serving you all.

Happy New Years, Alan 🙂