Canada's economy contracted in October, with real GDP falling 0.3% month-over-month, in line with expectations. The slowdown was widespread, with 11 out of 20 industrial sectors recording declines, highlighting the overall weakness in the economy.

The goods-producing sector was the main drag, falling 0.7% month-over-month with most components weakening. Manufacturing led the decline, heightening concerns that persistent external demand pressures and tightening financial conditions continue to weigh on Canada's industrial base. The service sector also dipped 0.2%, partly due to labor strikes disrupting production activities across multiple sectors.

Looking ahead, early signs suggest the economy will stabilize moderately. According to minutes released last Tuesday, the Bank of Canada's Governing Council unanimously agreed that it was difficult to predict whether the next interest rate move would be an increase or a decrease ahead of the December 10 rate decision. The seven-member rate-setting committee concluded that two key factors were the unpredictability of U.S. trade policy and the recent volatility in economic data.

At the December meeting, committee members agreed to maintain the interest rate at 2.25%, judging that this level is appropriate to keep inflation near the central bank's 2% target given the current economic outlook broadly aligning with expectations. The Bank of Canada stated it stands ready to act again if necessary, whether to curb price increases or bolster a weakening economy. Money markets predict the Bank of Canada's next move will be a 25-basis-point rate hike, potentially as early as October 2026.

The meeting minutes also indicate that the Management Committee views the 2026 review of the United States-Mexico-Canada Agreement as a “significant risk,” with the uncertainty surrounding its outcome potentially dampening business investment.

The USDCAD is currently forming a bullish pattern, characterized by an exceptionally long final arm. As the pattern nears completion, price action has become notably extreme. Additionally, the 1.618XA extension has been tested, and the BC extension warrants close attention, particularly as it aligns with the lowest price within the PRZ. These factors collectively suggest an impending reversal. The near-term target is the starting point of the recent series of sell-offs.

Trading Direction: Buy

Entry Price: 1.3679

Target Price: 1.3953

Stop Loss: 1.3570

Valid Until: January 14, 2026 23:55:00

Support: 1.3682, 1.3642, 1.3609

Resistance: 1.3806, 1.3872, 1.3953

Silver prices have faced headwinds following the Chicago Mercantile Exchange's (CME) decision to hike margin requirements for silver futures. Leveraged traders were compelled to reduce their holdings when prices were in technically overbought territory. Analysts pointed out that the ongoing correction is a result of position unwinding, rather than a decline in fundamental demand.

Despite short-term price fluctuations, structural supply constraints and robust industrial demand—particularly from the solar energy, electronics, and data center sectors—continue to underpin silver prices. Additionally, a surge in speculative demand from China has driven silver prices higher, with the premium on silver futures traded on the Shanghai Futures Exchange hitting an all-time high. These elevated premiums signal strong domestic demand in China, tightening global supply chains and echoing the earlier inventory shortages in London and New York vaults.

Safe-haven demand for silver remains strong amid lingering geopolitical risks. The prospect of an end to the Russia-Ukraine conflict was clouded again following the alleged attack on President Putin's official residence. In the Middle East, Saudi Arabia's air strikes on Yemen and Iran's declaration of "all-out war" against the US, Europe, and Israel have heightened fears of broader regional instability. Trump warned that the US would take further military action if Iran resumes its nuclear program.

Expectations of Fed rate cuts and political uncertainty have weighed on the US dollar. Currently, traders and investors are closely monitoring the Fed's moves, awaiting signals on when and how it will cut rates going forward. The market is pricing in at least two rate cuts in 2026, but most expect no major moves before June. The Fed itself projects just one rate cut next year, yet significant divisions within the central bank have left market participants highly uncertain about the next steps in US monetary policy.

In addition, traders are keeping a close eye on who President Donald Trump might nominate to succeed Jerome Powell as the next Fed Chair. Any news related to this appointment could further roil markets and trigger sharp swings in the US dollar, either upward or downward.

Looking ahead, traders will focus on US economic indicators, Fed rhetoric, and political developments. All these factors are likely to exert a significant impact on the US dollar's performance in early 2026. If the market gains greater clarity on the path of interest rates or the next Fed Chair, we may see considerable short-term volatility in the US dollar.

On the 1-hour chart, the Bollinger Bands have contracted, with moving averages flattening out. Prices are oscillating along the middle band. Following a bullish MACD crossover, the fast and slow lines have pulled back toward the zero line, indicating an imminent trend reversal. The RSI stands at 49, suggesting that market participants are adopting a wait-and-see stance. Immediate resistance is located near the upper Bollinger Band around the 77 level.

On the 4-hour chart, the Bollinger Bands have narrowed, with moving averages trading sideways. Prices have moved back above the EMA12. A sustained break above the EMA12 could see silver challenging the upper Bollinger Band. Conversely, a failure to hold above this level may trigger a pullback toward the EMA50 around 70 and the lower Bollinger Band near 67.5. The RSI is at 55, placing the market in a neutral zone. From a short-term perspective, lower highs have been forming, indicating a high probability of further correction.

Therefore, it is advisable to go short first, then long in the near term.

Trade Direction: Sell

Entry Price: 75

Target Price: 60

Stop Loss: 86

Support: 65/60/56

Resistance Levels: 70/75/80

Gold prices diverged at high levels during yesterday's session. In early trading, prices held firm at elevated levels, buoyed by sustained bets on the Fed's future rate-cut path as well as expectations of central bank and physical buying. However, gold subsequently retreated under the combined impact of exchange-level risk management moves and a short-term rebound in the US dollar.

The market's pricing of the Fed's 2026 rate cuts remains the core macro driver for gold: as long as the market expects the rate-cut cycle to persist, the decline in real interest rates will continue to boost gold's appeal. Conversely, any signal hinting at a slower pace of rate cuts will quickly curb gold prices.

Meanwhile, sudden changes in liquidity conditions and trading mechanisms amplified intraday volatility. The Chicago Mercantile Exchange (CME) recently raised margin requirements for precious metals futures to address extreme volatility. This move immediately squeezed leveraged capital and high-frequency positions after the market opened, triggering a rapid pullback in gold, silver and other precious metals futures. It was one of the direct triggers for yesterday's intraday decline.

In terms of capital flows: although gold ETFs have recorded continuous net inflows so far this year and central bank purchases remain robust (forming solid medium-to-long-term support), institutions were forced to adjust positions in the short term under the dual pressure of thin liquidity during the holiday window and margin hikes. This triggered a volume-light pullback, or a technical correction characterized by "rallying and then falling back". Monthly and quarterly flows of global gold ETFs still point to a solid bullish foundation, though short-term capital flows can reverse in an instant.

On the daily chart, gold opened higher but moved lower yesterday, with bears dominating intraday trading, leading to a single-day drop of over $200. Nevertheless, from the perspective of the overall trend, the moving average system still maintains a bullish alignment, indicating that the medium-to-long-term trend remains upward.

On the 4-hour chart, affected by the sentiment of yesterday's sharp decline, gold is experiencing a weak rebound intraday. There is a possibility of a secondary downward test in the short term. Traders should watch the primary support zone around 4300-4290 below and the immediate resistance range of 4400-4415 above.

Trade Direction: Sell

Entry Price: 4395.00

Target Price: 4295.00

Stop Loss: 4450.00

Valid Until: 13 January, 2026, 23:00:00

Support: 4300.00/4290.00

Resistance Levels: 4400.00/4415.00

For Canada, economic performance in 2025 can be described as "stable but with concerns." Although trade tensions with the United States were once seen as a potential trigger for recession, GDP still maintained positive growth, albeit slowing noticeably toward year-end. The labor market remained resilient, with unemployment steady around 6.5%, yet this level remains above historical averages, reflecting that underlying pressures have not dissipated. Entering 2026, new risks are gradually emerging, most notably in trade, financial markets, and employment prospects. Trade uncertainty is expected to remain a significant drag on the Canadian economy. The Canada–United States–Mexico Agreement (CUSMA) will undergo review in July 2026, a process itself likely to dampen corporate investment appetite. While most U.S. industry groups favor retaining the agreement, the current review mechanism grants the U.S. considerable negotiating leverage, making the prospect of smooth continuation until 2036 uncertain. The U.S. has made clear its focus on issues such as Canada's dairy supply management system and the Online Streaming Act, which could become friction points in negotiations. Currently, about 90% of Canadian exports to the U.S. enjoy tariff exemptions under rules of origin; if negotiations deteriorate or the agreement collapses, Canadian exporters could face rising tariffs. This uncertainty may continue to suppress investment and growth expectations until talks conclude. Meanwhile, rapid global expansion of AI investment also poses indirect but inevitable financial risks for Canada. As large tech firms increase spending on AI infrastructure, their debt levels rise significantly, sparking market concerns over potential asset bubbles. If these companies fail to meet return expectations, stock prices and financing conditions could deteriorate quickly. The Bank of Canada has warned that if U.S. markets substantially reprice AI prospects, triggering equity adjustments, negative effects could spill over into Canada via financial and confidence channels. Recent notable pullbacks in some tech stocks from their highs also indicate that excessive optimism toward AI is cooling.

Investors will closely watch the minutes of the Federal Open Market Committee (FOMC) for the latest clues on the monetary policy outlook. At its most recent meeting, the Fed cut rates for the third consecutive time by 25 basis points, lowering the target range to 3.50%–3.75%. The Fed also signaled it will only cut rates once in 2026. Nomura economists noted that although 2025 growth was clearly weighed down by trade and immigration policies, overall resilience remained, and these headwinds are now easing, while fiscal and monetary policy are shifting toward more stimulative stances. At the same time, the U.S. economy still faces multiple risks, including a weakening labor market, persistently high inflation, and internal rifts over policy priorities. In addition, President Trump is set to appoint a new Fed chair to replace Jerome Powell, whose term ends in May. Markets widely expect the new chair to favor pushing for rate cuts. This year, the U.S. job market has gradually cooled, with monthly job additions significantly lower than a year ago and the unemployment rate edging up. These changes prompted Fed policymakers to unanimously support a series of rate cuts toward year-end. November's unemployment rate was 4.6%, but economists note possible distortions due to limited data collection during the government shutdown. Stubbornly high inflation may still constrain room for further cuts. Although Q3 inflation came in well below expectations, economists believe this may underestimate actual price pressures, and it will take months to confirm whether goods inflation driven by tariffs fades as policymakers anticipate. Consumer concern over the labor market is rising. The Conference Board's latest data show consumer sentiment on the job market has deteriorated to its lowest since early 2021. This trend leads some economists to expect households may choose to save rather than spend extra income from tax reforms.

Based on the daily chart, USD/CAD has broken below the EMA200 and is oscillating lower along the EMA12, with MACD and signal lines crossing below the zero axis, indicating entry into a bearish trend. However, a bullish engulfing pattern has emerged, breaking out of the descending channel, suggesting a short-term rebound may occur. MACD is close to forming a golden cross, RSI at 29 signals oversold territory: meaning the downtrend is still valid, but a rebound could happen at any time. In the 4-hour chart, Bollinger Bands are narrowing, moving averages are converging, and downward momentum is gradually weakening. After a golden cross, the MACD and signal lines are retracing toward the zero axis but remain far from it, confirming that the rebound is incomplete. Resistance lies near EMA50 and EMA200 at approximately 1.372 and 1.384, respectively. RSI at 44 reflects prevailing pessimism. Therefore, it is recommended to buy now and sell later.

Trade Direction: Buy

Entry Price: 1.368

Target Price: 1.42

Stop Loss: 1.35

Support: 1.36/1.357/1.35

Resistance: 1.414/1.42/1.44

The Japanese Yen experienced widespread strengthening following the release of the Bank of Japan’s (BoJ) latest monetary policy minutes. The documents revealed a consensus among members that interest rates remain significantly below neutral levels. However, several officials emphasized the necessity of a cautious approach to avoid destabilizing the domestic economy or broader financial markets.

In December, the BoJ successfully hiked its benchmark rate by 25 basis points (bps) to 0.75%, marking a three-decade high. The bank further hinted at additional adjustments throughout 2026 as it continues its normalization process. Despite this hawkish pivot, investor concerns persist regarding Prime Minister Sanae Takaichi’s pro-stimulus stance. Market participants fear such policies could exacerbate an already strained fiscal deficit, as the looming risk of a debt crisis remains a significant headwind for any sustained Yen recovery.

The U.S. Bureau of Economic Analysis reported that the domestic economy expanded at a robust annualized rate of 4.3% in the third quarter. This figure significantly outperformed market expectations of 3.3% and surpassed the previous estimate of 3.8%. Accompanying this strong growth, inflation metrics within the Gross Domestic Product (GDP) report remained firm: the GDP Price Index rose by 3.7%, while Personal Consumption Expenditures (PCE) increased by 2.9%, with core PCE prices climbing 2.8%.

Despite this vigorous growth, the manufacturing sector exhibited signs of cooling. Durable Goods Orders fell by 2.2% in October, reversing a prior gain of 0.7%. Excluding defense, orders dropped by 1.5%, and while orders excluding transportation saw a marginal 0.2% increase, overall Industrial Production slipped by 0.1% month-over-month. In contrast, the housing market showed unexpected strength; data from the National Association of Realtors revealed that Pending Home Sales rose by 3.3% in November, marking their highest level since early 2023.

The Federal Reserve reduced the federal funds rate by 25 basis points (bps) at its December meeting, bringing the target range to 3.50%–3.75%. This marks a cumulative reduction of 75 bps in 2025 as the central bank navigates a cooling labor market and persistent inflation.

According to the CME FedWatch Tool, markets are now pricing in an accelerated easing cycle, with traders anticipating at least two additional cuts by the end of September 2026.

The USD/JPY pair is currently exhibiting a bullish reaction as it approaches a critical technical floor. The 100 and 200-period Moving Averages (MAs) are converging near the 155.80 price level, creating a formidable zone of dynamic support.

This area is increasingly significant as the price action appears to be carving out an Inverse Head and Shoulders pattern. This classic reversal formation, aligning with the broader prevailing trend, suggests that a renewed bullish extension from this support zone is highly probable.

From a momentum perspective, the Relative Strength Index (RSI) recently touched the 39 level. While this is well clear of overbought territory, the indicator is already rebounding from levels just below the neutral mark, signaling that the bullish impulse has substantial room to expand.

The primary upside objective remains the local high of 157.72. The pair has tested this ceiling twice without success; however, current momentum suggests a third attempt may be imminent. Traders should remain vigilant, as a forceful break and close below the 155.80 support zone would effectively invalidate this bullish setup and likely trigger a deeper technical correction.

Trading direction: Buy

Entry price: 156.30

Target price: 157.70

Stop loss: 155.30

Validity: Jan 09, 2025 15:00:00

The U.S. Bureau of Economic Analysis reported that the domestic economy expanded at a robust annualized rate of 4.3% in the third quarter. This figure significantly outperformed market expectations of 3.3% and surpassed the previous estimate of 3.8%. Accompanying this strong growth, inflation metrics within the Gross Domestic Product (GDP) report remained firm: the GDP Price Index rose by 3.7%, while Personal Consumption Expenditures (PCE) increased by 2.9%, with core PCE prices climbing 2.8%.

Despite this vigorous growth, the manufacturing sector exhibited signs of cooling. Durable Goods Orders fell by 2.2% in October, reversing a prior gain of 0.7%. Excluding defense, orders dropped by 1.5%, and while orders excluding transportation saw a marginal 0.2% increase, overall Industrial Production slipped by 0.1% month-over-month. In contrast, the housing market showed unexpected strength; data from the National Association of Realtors revealed that Pending Home Sales rose by 3.3% in November, marking their highest level since early 2023.

The Federal Reserve reduced the federal funds rate by 25 basis points (bps) at its December meeting, bringing the target range to 3.50%–3.75%. This marks a cumulative reduction of 75 bps in 2025 as the central bank navigates a cooling labor market and persistent inflation.

According to the CME FedWatch Tool, markets are now pricing in an accelerated easing cycle, with traders anticipating at least two additional cuts by the end of September 2026.

Across the Atlantic, the European Central Bank (ECB) maintained its key interest rates for the fourth consecutive meeting. The Deposit Facility remains at 2.00%, while the Main Refinancing and Marginal Lending rates are held at 2.15% and 2.40%, respectively. Gediminas Šimkus, Governor of the Bank of Lithuania, noted that risks to both inflation and growth have increasingly tilted to the downside. ECB President Christine Lagarde emphasized a cautious, data-dependent stance, clarifying that neither hikes nor cuts were discussed as the bank monitors global trade uncertainties.

The EUR/USD pair has decisively breached the previous resistance level at 1.1752, a ceiling that had held firm since early October. In a classic technical shift, this level is now acting as support, signaling that the prevailing bullish trend is poised for a new impulse.

The technical outlook is further bolstered by the ascending trendline, which converges precisely with this support-resistance flip zone, adding significant weight to the potential for a bounce.

The 100 and 200-period Moving Averages (MAs) are currently situated at 1.1722 and 1.1654, respectively. Their upward trajectory confirms a dominant bullish momentum. From an oscillator perspective, the Relative Strength Index (RSI) recently touched a local low of 44, dipping just below the neutral zone before recovering quickly.

Currently sitting at 51, the RSI reflects a healthy market structure with ample room for further upside before reaching overbought conditions. Traders should remain alert, however; a forceful break below the ascending trendline would invalidate this setup and likely trigger a deeper correction toward the moving averages, which would then serve as the primary line of defense.

Trading direction: Buy

Entry price: 1.1770

Target price: 1.1890

Stop loss: 1.1700

Validity: Jan 09, 2026 15:00:00