Japan’s industrial production fell by 2.6% in November, underperforming against expectations of a 2% decline. This downturn reflects a broader challenging economic environment for industrial output.
Various asset markets saw movements with USD/CAD trading near five-month lows due to differing policies between Canada and the US. Concurrently, gold pulled back from previous all-time highs, trading below $4,500 as trading quietened before the holiday season.
Market Trends And Predictions
GBP/USD remained in a narrow range around 1.3500, influenced by light trading and holiday market conditions. Bitcoin traded near $86,770 after being unable to surpass the $90,000 mark, with ETF outflows reaching $188.64 million.
Economic projections for 2026 suggest continued growth, driven by factors present in the previous year. Meanwhile, Avalanche faced hurdles trading close to $12 following regulatory updates regarding an ETF conversion.
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The unexpected 2.6% drop in Japan’s November industrial production signals deeper economic trouble. This figure is the steepest monthly decline we’ve seen since the second quarter of 2025. We should consider buying put options on the Nikkei 225 or call options on USD/JPY, anticipating further Yen weakness as Q4 GDP forecasts are now being revised down.
Federal Reserve Impact On Markets
The US Dollar’s broad weakness is the main story heading into the new year, driven by persistent expectations of Fed easing. Current Fed funds futures data now prices in a greater than 85% probability of a 25-basis-point rate cut by the March 2026 meeting. This outlook continues to support strategies that benefit from a falling dollar, such as being long on gold or the Canadian Dollar.
While Gold has retreated below $4,500 after hitting record highs, this looks like holiday profit-taking rather than a trend reversal. We recall similar pullbacks during the 2020-2021 rally, which often presented buying opportunities for call options or bull call spreads. Look for support around the $4,450 level before re-engaging, as the fundamental driver of a dovish Fed remains firmly in place.
With the S&P 500 in quiet holiday trading, low liquidity could exaggerate any moves in the next few sessions. The CBOE Volatility Index (VIX) is currently sitting near yearly lows of 11.8, making long-dated call options relatively cheap for positioning for the anticipated growth in 2026. However, we should remain hedged against any year-end rebalancing that could cause a short-term dip.
The recent slip in Bitcoin below $87,000 should be watched closely, as it’s directly tied to institutional sentiment. The spot Bitcoin ETFs have now seen over $750 million in net outflows this past week, a significant shift from the strong inflows seen in November 2025. This suggests bearish sentiment in the short term, making protective puts an attractive hedge against further declines.
