Asian Pacific stock indices mark time

US stock indices had a relatively quiet session yesterday. The Dow was the biggest mover, ending down 0.4%. The S&P 500 lost 0.1%, while the NASDAQ and Russell 2000 eked out modest gains of 0.1% and 0.2% respectively. This hesitancy continued into this morning, with US stock index futures little changed in early trade.

Source: TN Trader

In fact, all the majors have largely tracked sideways over the past fortnight as traders looked towards tonight’s interest rate announcement from the Federal Reserve. There’s now a 90% probability that the Fed’s FOMC (Federal Open Market Committee) will cut rates by 25 basis points, according to the CME’s FedWatch Tool. This is now back up to where it was before the Fed’s last meeting at the end of October (where it also cut rates by 0.25%).

This was when Fed Chair Jerome Powell, during his subsequent press conference, warned investors that a December cut was not a foregone conclusion. Equities sold off, and the December rate cut probability dropped to 30%. It then rebounded a few weeks ago after John Williams, of the New York Fed, gave a dovish speech, indicating that a rate cut was back on the cards.

Due to this switcheroo, investors are wondering how the Fed will present tonight’s likely rate cut. It’s quite possible that a real division emerges, with the doves voicing concerns about weakness across the labour market, and hawks worried about inflation.

Bear in mind, there’s also the FOMC’s quarterly Summary of Economic Projections (SEP) to consider. This is where each FOMC member gives their forecasts for GDP, unemployment, inflation and the Fed Funds rate (through the ‘Dot Plot’).

The last Dot Plot, from September, indicated that the majority of FOMC members expected just one more 25-basis point reduction in 2026. If that is the same tonight, then the markets would interpret a cut as ‘hawkish’, and that may not be viewed positively. Jerome Powell will also hold a press conference. This comes at a tricky time. President Trump has said he has picked a replacement for Mr Powell for when his term expires in May.

This is widely thought to be Kevin Hassett, a supporter of the President and well-known dove. But to many people’s surprise, Mr Hassett has turned more hawkish of late. This may be one of the reasons that Treasury yields have picked up recently. As Bette Davis’s character Margo Channing so famously said: “Fasten your seatbelts, it’s going to be a bumpy night!”

There was a softer tone across European stock indices this morning. As in the US, the Fed meeting is the day’s defining catalyst, with traders waiting for confirmation of an expected rate cut and, more importantly, Powell’s guidance on the pace of easing into next year.

Source: TN Trader

European sentiment took a knock after public criticism from US President Donald Trump, who labelled regional leaders “weak” in remarks published by Politico. The comments arrive as Europe attempts to maintain influence in Ukraine-related negotiations, adding another layer of geopolitical discomfort ahead of key central bank decisions next week.

There was very little movement across Forex pairs this morning as traders sat on their hands ahead of tonight’s conclusion to the two-day FOMC monetary policy meeting. The cash Dollar Index continued to hover south of 99.00, with support holding around 98.50 so far.

The Dollar Index has shown some signs of consolidation, having been rejected at a strong level of resistance at 100.00. It seems quite likely that there will be some resolution after tonight’s meeting and Fed Chair Powell’s subsequent press conference.

Source: TN Trader

The Japanese yen steadied this morning, having dropped sharply yesterday. But recent yen weakness has seen the USD/JPY push closer to multi-month highs around 158.00.

The Bank of Japan is expected to raise interest rates at next week’s monetary policy meeting. But the picture is clouded by Japan’s fiscal outlook and growth trajectory. The current government has recently announced a large package of stimulus in an effort to boost growth.

Gold continues to trade on either side of $4,200. Unlike silver (see below), gold has been consolidating for the best part of a fortnight now. This has helped its daily MACD to track sideways above the ‘neutral’ level.

This means there’s no clear signal for where prices may go next, although tonight’s conclusion to the Fed’s two-day monetary policy meeting rate has the potential to be the catalyst for a big move. A quarter-point rate cut appears to be a done deal.

Traders are likely to focus on the Fed’s outlook for monetary easing into 2026. That means the FOMC’s quarterly Summary of Economic Projections, along with the tone of Fed Chair Powell’s subsequent press conference, will be parsed closely.

Source: TN Trader

Silver continues to be the standout performer amongst precious metals. Yesterday it surged above $60 per ounce for the first time in history. It rallied further overnight, briefly topping $61.60 to hit a fresh record intra-day high before pulling back. 

Buying interest has been intense, supported by lingering supply tightness and strong ETF inflows. But the daily MACD indicates that it is once again entering seriously overbought territory.

There’s nothing that says silver can’t continue to be overbought. In fact, when silver is on a tear, as it is now, the MACD can become exceedingly overextended. But it is also a warning that silver may have risen too high, too fast.

Silver has more than doubled this year, outpacing gold’s impressive 60% gain. The dynamic between gold’s steadiness and silver’s explosive momentum continues to define the precious metals space this week.

Source: TN Trader

Oil was a touch firmer in early trade this morning. But the gains were modest and did little to make back losses from the beginning of this week. On Friday, front-month WTI hit its highest level in over a fortnight as it briefly broke above $60 per barrel. It had another attempt at this resistance level on Monday. But sellers suddenly came back in to overwhelm buying pressure, and this saw oil fall back sharply.

Source: TN Trader

The daily MACD is back below neutral levels and has started to curl down. This would suggest a small increase in downside momentum, but nothing too serious. Traders continue to listen out for any progress in the ongoing negotiations to bring an end to the war between Ukraine and Russia.

There’s a view that an end to hostilities will lead to additional supply as sanctions on Russian oil exports come to an end. As it’s far from clear if these sanctions have had much of an effect, any initial movement following a peace deal is likely to be short-lived. Yet it’s far from clear that a peace deal is close, as it’s far from clear that Russia wants one.

Meanwhile, the market dynamics are unchanged. Supply is plentiful as global demand growth slows. The US Energy Information Administration releases its weekly inventory update later this afternoon.

Gas prices continue to ease. The January futures dropped back to $4.450, levels last seen in early November. The combination of mild weather expectations and ample supply continues to exert downward pressure on the market.

The recent reversal has been brutal, outpacing even the rally which pushed prices to three-year highs at the end of last week. With neither demand nor seasonal conditions offering meaningful support, gas remains vulnerable to further consolidation as traders reassess what had become an overbought backdrop.

Bitcoin and Ether are now sitting right up against key resistance zones. Both markets have steadied this morning following a strong late-session surge yesterday. The overnight pause reflects a market catching its breath, with sentiment still constructive.

The daily MACDs for both Bitcoin and Ether have pushed up sharply from the oversold levels seen in late November. Yet both are still below ‘neutral’, suggesting that momentum remains to the upside, for now. Prices have also put in several higher lows and higher highs.

And while it would be very dangerous to sound the ‘all clear’, recent price behaviour has been quite constructive from a bullish perspective. The recent rally underscores that crypto remains a barometer for broader risk appetite, and traders will be watching closely to see whether the next move higher can break through the levels capping price action today.

Volatility remains subdued, with the December VIX trading around the mid-17s and showing little inclination to push higher ahead of the Fed announcement. The index continues to signal a market that is cautious but far from stressed, with traders largely positioned for a rate cut and awaiting clarity on the policy outlook for 2026.

The VIX’s lack of movement underscores the broader theme of risk assets holding steady into the decision, with volatility contained for now.

Markets across the board are effectively frozen ahead of tonight’s Federal Reserve announcement. A 25-basis-point cut is widely assumed. The real focus is on communication, particularly whether the Fed leans toward a “hawkish cut” that tempers expectations for additional easing.