As we head into this shortened holiday trading week, markets are presenting a fascinating mix of opportunities and challenges. With the Christmas holiday just around the corner, today’s session will be crucial for traders looking to position themselves ahead of the year-end close.
US Stock Markets: Range-Bound Near Record Highs
The major US indices continue to hover near all-time highs, though the much-anticipated “Santa Claus rally” has yet to materialise. Last week saw the S&P 500 edge up just 0.1% to settle at 6,858 points, whilst the Dow Jones slipped 0.7% and the Nasdaq 100 managed a modest 0.6% gain. This range-bound behaviour reflects a market caught between optimistic year-end sentiment and caution ahead of key economic releases.
The technology sector has shown particularly divergent performance. Oracle’s struggles continue, with shares down 49% from September’s peak to $177.10, as concerns persist over its financial position following the Blue Owl Capital financing setback. In stark contrast, Micron delivered a stunning 18% surge on exceptional memory chip demand, projecting earnings per share 75% above analyst expectations. This divergence underscores the importance of stock selection in the current environment.
From a technical perspective, the US Tech 100 index has shown underlying weakness, prompting a revision of the trading range downward to 24,600-25,830. The index faces resistance at its 20-day moving average, and traders should watch closely whether support holds above the lower threshold. A break below could trigger a test of the 24,000 support zone.
Economic Data in Focus
Today’s session will be relatively quiet ahead of tomorrow’s crucial data releases. On Tuesday, we’ll receive the initial estimate for third-quarter GDP, expected to show growth of 3.2% quarter-on-quarter annualised, down from the second quarter’s 3.8%. This report, delayed by the government shutdown, will be particularly important for gauging the economy’s momentum heading into 2026.
The recent employment data has painted a mixed picture. Whilst November saw non-farm payrolls expand by 64,000, unemployment rose to 4.6%, the highest level since September 2021. Meanwhile, inflation fell to 2.7% year-on-year, below forecasts. This combination of labour market softening and inflation moderation has strengthened expectations for Federal Reserve easing in 2026, though the low inflation reading may prove temporary due to shutdown-related data collection disruptions.
Forex Markets: Central Bank Divergence Drives Volatility
The currency markets are navigating a period of significant central bank policy divergence, creating both opportunities and risks for forex traders.
The Japanese yen has been the standout mover, weakening 1.4% to 157.75 against the dollar despite the Bank of Japan raising rates by 25 basis points to 0.75%, the highest level in three decades. The yen’s decline reflects trader disappointment with the BoJ’s lack of clarity on future tightening. However, with USD/JPY now testing resistance at 158.90, traders should be alert to potential government intervention if the pair approaches the 160 level, where authorities previously acted in summer 2024. A sustained break above 158.90 could open the path towards 161.90, whilst failure to break through would likely see consolidation with support around 153.70-154.50.
The pound has shown resilience, trading around 1.3390-1.3400 against the dollar after gaining ground following three days of losses. The Bank of England’s “hawkish cut” last week, reducing rates by 25 basis points to 3.75% whilst signalling a slower pace of future cuts, has provided support. With UK third-quarter GDP data due this week, GBP/USD traders will be watching closely for any surprises that could shift the BoE’s policy trajectory.
The euro is holding steady around 1.1719 against the dollar after the European Central Bank held its deposit rate at 2.0% whilst upgrading its 2026 forecasts. The improved economic outlook has reinforced market expectations for stable rates throughout 2026, providing a degree of certainty for EUR/USD traders.
Commodities: Gold Shines, Oil Struggles
Gold continues its remarkable run, hitting record highs above $4,400 as bulls eye the $4,443 target. December seasonality is supporting the uptrend, though traders should be mindful that thinning year-end volumes raise the risk of consolidation or profit-taking.
Oil markets present a more challenging picture. WTI crude has experienced substantial volatility, dropping below $55 per barrel (the lowest since 2021) before recovering towards $57. The market faces competing dynamics, with geopolitical developments providing temporary support against overwhelmingly bearish fundamentals. The International Energy Agency projects a substantial market surplus of 3.8 million barrels per day in 2026, representing nearly 4% of global demand. With WTI down 21% year-to-date, this is tracking towards its worst annual performance in seven years. The technical outlook remains bearish, with support at $55-56 and resistance at $61-62.
Trading Strategy for Today
Given the holiday-shortened week and reduced liquidity, traders should exercise caution with position sizing. The key levels to watch include:
For US indices, monitor the 24,600-25,830 range on the US Tech 100, with particular attention to whether the 20-day moving average provides resistance.
In forex, USD/JPY at 158.90 is the critical level, whilst GBP/USD support around 1.3350-1.3400 should hold ahead of UK GDP data.
For commodities, gold’s momentum remains strong above $4,400, whilst oil traders should watch for a sustained break above $57 or a retest of the $55-56 support zone.
With markets closing early on Wednesday and remaining shut on Thursday for Christmas, today and tomorrow represent the final opportunities for meaningful positioning ahead of the year-end. Focus on quality setups, maintain disciplined risk management, and be prepared for potentially exaggerated price movements due to reduced liquidity.
The interplay between softening economic data and elevated market valuations will continue to drive price action. Traders who remain nimble and respect key technical levels will be best positioned to navigate this challenging environment.
