Oil prices weakened yesterday after President Trump said Venezuela would supply large volumes of sanctioned crude to the United States.
Energy
Developments in Venezuela remain in the spotlight, adding further downside pressure to oil prices. President Trump said Venezuela is prepared to sell up to 50 million barrels of sanctioned crude to the United States, a move that could also immediately weigh on Canadian crude exports to the U.S.
Such a deal would effectively open a release channel for Venezuelan oil, which has struggled to reach global markets due to a U.S. blockade on sanctioned tankers entering and leaving the country. Redirecting these barrels to the U.S. could ease storage constraints and reduce the need for Venezuela to curb production.
The U.S. Department of Energy confirmed that Venezuelan crude is already being marketed internationally, while Trump’s energy secretary stated that Washington intends to maintain long-term control over future Venezuelan oil sales. This strategy is reinforced by the continued tanker blockade, with two additional vessels reportedly seized yesterday.
Washington’s growing influence over Venezuela’s oil sector also raises uncertainty about the country’s future role within OPEC.
Meanwhile, Energy Information Administration (EIA) data showed U.S. crude inventories fell by 3.83 million barrels last week, the sharpest draw since late October. However, product balances were more bearish, as gasoline stocks rose by 7.7 million barrels and distillate inventories increased by 5.6 million barrels.
These inventory builds point to refinery utilization remaining firm, while implied demand for both products softened somewhat over the past week.
European gas prices moved higher yesterday, with TTF closing more than 2.5% up on the day. Colder conditions across parts of Europe, along with forecasts for below-average temperatures in the days ahead, are supporting the market. The current cold spell has also accelerated storage drawdowns, with EU gas inventories now at 58% of capacity, compared with a five-year average of 72%.
The latest positioning data show that investment funds cut their net short exposure in TTF for a third straight week. Funds purchased 6.2 TWh during the latest reporting period, reducing their net short position to 72.4 TWh.
The Australian Dollar weakens after the trade surplus narrowed to 2,936M MoM in November.
The Australian Dollar weakens after the trade surplus narrowed to 2,936M MoM in November.
The US ISM Services PMI climbed to 54.4 in December, up from 52.6 and above the 52.3 forecast.
The Australian Dollar (AUD) edges lower against the US Dollar (USD) on Thursday following Australia’s Trade Balance data, which showed that the trade surplus narrowed to 2,936M MoM in November versus 4,353M (revised from 4,385M) in the previous reading.
The Australian Bureau of Statistics (ABS) reported on Thursday that Exports fell by 2.9% MoM in November from a rise of 2.8% (revised from 3.4%) seen a month earlier. Meanwhile, Imports grew by 0.2% MoM in November, compared to a rise of 2.4% (revised from 2.0%) seen in October.
Australia’s mixed November Consumer Price Index (CPI) has left the Reserve Bank of Australia’s (RBA) policy path unclear, shifting attention to the quarterly CPI release later this month for stronger direction.
RBA Deputy Governor Andrew Hauser commented Thursday that November’s inflation figures were broadly in line with expectations, and noted that rate cuts are unlikely in the near term.
Data from the Australian Bureau of Statistics (ABS) on Wednesday showed annual inflation easing to 3.4% in November from 3.8% in October. The figure came in below the 3.7% forecast but remained above the RBA’s 2–3% target band. It was the lowest print since August, with housing costs rising at their weakest pace in three months.
US Dollar steadies amid market caution
The US Dollar Index (DXY), which tracks the Greenback against six major peers, is holding steady near 98.70 at the time of writing.
The Dollar is firm as soft recent data highlights a fragile US economy ahead of Friday’s pivotal jobs release, keeping sentiment subdued.
Traders are watching Thursday’s Initial Jobless Claims data, with focus shifting to Friday’s Nonfarm Payrolls report, expected to show a slowdown to 55,000 new jobs in December from 64,000 in November.
The ISM reported Wednesday that the US Services PMI strengthened to 54.4 in December from 52.6, beating forecasts of 52.3.
ADP data showed private payrolls increased by 41,000 in December, following a revised drop of 29,000 in November and slightly below the 47,000 consensus.
Fed Governor Stephen Miran said Tuesday the Federal Reserve may need to cut rates aggressively this year to sustain economic momentum, while Minneapolis Fed President Neel Kashkari cautioned that unemployment could “pop” higher.
Richmond Fed President Tom Barkin, who is not voting on policy this year, said Tuesday that rate adjustments will need to be carefully calibrated to incoming data, highlighting risks to both inflation and employment, per Reuters.
CME FedWatch pricing suggests an 88.9% chance the Fed will leave rates unchanged at its January 27–28 meeting.
China’s RatingDog Services PMI slipped to 52.0 in December from 52.1, while last week’s Manufacturing PMI ticked up to 50.1 from 49.9. Shifts in the Chinese economy are closely watched due to Australia’s deep trade ties with China.
November CPI in Australia was flat month-on-month, matching October. The RBA’s Trimmed Mean rose 0.3% MoM and 3.2% YoY. Seasonally adjusted Building Permits surged 15.2% MoM to nearly four-year highs of 18,406 units, rebounding sharply from October’s revised 6.1% drop. Annual permits climbed 20.2%, overturning a revised 1.1% decline.
The Australian Financial Review reported that the RBA may still have tightening ahead, with economists expecting sticky inflation and penciling in at least two further rate hikes.
The Australian Dollar is holding close to 0.6700 after retreating from its 15-month peak, with AUD/USD trading near 0.6720 on Thursday.
Daily chart signals show the pair staying inside an ascending channel, maintaining a bullish structure. The 14-day RSI at 64.42 reinforces positive momentum.
On the upside, AUD/USD could retest 0.6766 — its highest level since October 2024 — and possibly climb toward the channel’s upper boundary near 0.6840.
Initial support is located around 0.6720 at the channel’s lower boundary, followed by the nine-day EMA at 0.6706. A break beneath that confluence area could expose downside toward the 50-day EMA at 0.6626.
The USD/CAD pair strengthened as the commodity-linked Canadian dollar struggled amid growing concerns over demand for Canadian oil.
Canada’s Prime Minister Mark Carney stated that Canadian crude remains low risk and competitive despite increasing Venezuelan exports.
Meanwhile, the U.S. dollar held steady as cautious market sentiment prevailed ahead of Friday’s key jobs report, influenced by fragile economic data.
USD/CAD extended its winning streak to a fifth consecutive day, trading near 1.3860 during Asian session on Thursday. The pair strengthened as the commodity-linked Canadian dollar faced pressure following U.S. President Donald Trump’s indication of plans to resume Venezuelan crude imports, raising concerns about increased supply and intensified competition for Canadian oil demand.
Despite this, Prime Minister Mark Carney affirmed that Canadian crude remains low risk and competitive even amid potential growth in Venezuelan exports. Carney’s office also announced his upcoming visit to China from January 13–17, aiming to diversify Canada’s export markets beyond the United States amid ongoing uncertainty over U.S. trade policy.
Canada’s seasonally adjusted Ivey Purchasing Managers’ Index (PMI) rose to 51.9 in December 2025 from 48.4 in November, exceeding the expected 49.5 and marking a return to expansion after a month of contraction. Canada’s Trade Balance data for October is scheduled for release on Thursday.
The U.S. dollar (USD) remained steady amid a fragile U.S. economic outlook ahead of Friday’s key jobs report, which has moderated market sentiment. The U.S. Nonfarm Payrolls (NFP) for December are forecasted to show a gain of 55,000 jobs, down from 64,000 in November.
On Wednesday, the Institute for Supply Management (ISM) reported the U.S. Services PMI increased to 54.4 in December from 52.6 in November, beating the expected 52.3. Additionally, the Automatic Data Processing (ADP) Employment Change showed an increase of 41,000 jobs in December, following a revised loss of 29,000 jobs in November, though this was slightly below market expectations of 47,000.
Expect a wave of higher gold-price forecasts to dominate headlines in the near future, while the metal continues to rebuild positions along the way. Not because strategists have suddenly become bullish, but because the market itself is forcing a reassessment. Price action has led. Positioning is simply following the trend. Conviction, as always, comes last.
Gold did not merely break through $4,500. It paused, consolidated, and is now poised to resume its advance once the current round of technically driven profit-taking fades. This has never been a momentum-driven rally. Instead, it has unfolded through a steady sequence of advances, orderly consolidations, and renewed accumulation.
Each pullback has drawn in fresh buyers rather than triggering forced liquidation—an unmistakable feature of a durable trend. Viewed through that lens, $4,800 appears less like an ambitious bank upgrade and more like the next logical level of support. $5,000 is no longer a distant target; it is increasingly taking on a structural character.
The primary force behind this move is monetary gravity. As the Federal Reserve progresses further into its easing cycle, the traditional opportunity-cost argument against holding gold continues to weaken. Gold does not require aggressive rate cuts—it only needs persistent uncertainty around real returns. When policy becomes conditional and forward guidance loses clarity, gold becomes a place where capital waits rather than withdraws.
The White House–backed shift toward more dovish Fed leadership is therefore important, not for political reasons but for its mechanical implications. Questioning central bank independence may be the most underpriced risk in the gold market today, and markets will adjust accordingly. They trade anticipated reaction functions, not individual personalities.
A clearer shift toward policy accommodation is reshaping expectations about both the depth and duration of easing. That adjustment filters through real yields, term premia, and currency assumptions—and gold tends to react well before these changes are fully reflected in interest-rate markets.
The second force is structural demand, which is where the rebuilding becomes self-reinforcing. For the first time since the mid-1990s, gold has surpassed U.S. Treasuries as a share of global central-bank reserves. This is not cyclical accumulation; it is balance-sheet reallocation. Reserve managers are reducing concentration risk in a system that feels increasingly politicized and less predictable. Demand of this kind does not fade on pullbacks—it intensifies.
ETF flows and private capital then follow, adding exposure gradually rather than chasing price surges.
Geopolitics provides the backdrop rather than the trigger. Venezuela is not the catalyst—it is the reminder. Energy security, trade frictions, and political alignment are no longer episodic shocks; they are enduring conditions. Gold performs well in such an environment because it does not require crisis to justify ownership. It thrives on the steady build-up of uncertainty, encouraging investors to maintain positions and rebuild as volatility subsides.
The U.S. dollar completes the feedback loop. Its near double-digit decline over the past year reflects more than a typical cycle; it points to a subtle reassessment of dollar primacy. Capital is no longer assuming permanence. Gold naturally absorbs that hesitation, functioning less as an inflation hedge and more as balance-sheet insurance. Dollar strength tends to stall gold; dollar weakness reignites it. The cadence itself invites repeated re-entry.
What lends credibility to this cycle is that gold is not moving in isolation. Silver has already repriced on the back of genuine supply constraints layered onto sustained industrial demand. Copper, now at record levels, is not a product of speculative excess—it reflects the physical market asserting itself. Aluminum and nickel echo the same signal more quietly. Together, they point to a broader shift across metals, with gold at the core.
In simple terms, gold is likely to keep rebuilding positions throughout the year because the market structure supports it. Rallies are absorbed rather than rejected. Pullbacks are met with demand, not fear. Analysts will continue to raise their targets because price action is already pulling them in that direction.
$5,000 is not an audacious forecast. It represents the market sketching out a new equilibrium—and repeatedly inviting capital to re-enter, one rebuilt position at a time.
After months of rising tensions, the United States launched a major military operation in Venezuela on 3 January 2026, resulting in the capture of President Nicolás Maduro and his wife, Cilia Flores. U.S. President Donald Trump confirmed the operation, saying Washington would administer Venezuela until a stable transition government could be established. This marks one of the most dramatic U.S. interventions in Latin America in decades, with Maduro removed from power and taken into U.S. custody.
Maduro, long a focal point of U.S. sanctions and foreign policy pressure, was transported to the United States to face federal charges—such as narco‑terrorism and drug trafficking—filed in the Southern District of New York.
Venezuela holds the world’s largest proven oil reserves, and the sudden change in leadership carries significant geopolitical and economic implications well beyond its borders.
Why Did the US Capture Maduro?
Nicolás Maduro rose through the Venezuelan political system under socialist leader Hugo Chávez and became president in 2013. His time in power was widely criticized domestically and internationally, with opponents accusing him of suppressing dissent, restricting freedoms, and holding elections that lacked credibility.
Relations with Washington deteriorated sharply, especially under the Trump administration. U.S. officials accused Maduro’s government of involvement in drug trafficking and creating conditions that fueled migration toward the United States. They also branded elements of his regime—including the Cartel of the Suns—as a terrorist organization.
Tensions escalated in 2025 when the U.S. increased the bounty for Maduro’s arrest to $50 million and expanded military pressure in the region, including strikes on vessels the U.S. claimed were tied to drug smuggling.
On 3 January 2026, after months of military buildup and diplomatic pressure, U.S. forces launched a major operation in Venezuela—code‑named Operation Absolute Resolve—that resulted in the capture of Maduro and his wife. The U.S. government framed the intervention as a law‑enforcement action tied to longstanding criminal charges against Maduro, including narcoterrorism.
The United States claims that Venezuelan officials were engaged in government‑backed drug trafficking, asserting links with the so‑called Cartel of the Suns, which Washington has designated as a terrorist organization—a claim Maduro vehemently rejects. He argues that U.S. actions were aimed at forcing regime change and securing control over Venezuela’s vast oil riches.
Only hours before his detention, Maduro made his final public appearance as president when he hosted China’s special envoy, Qiu Xiaoqi, at the Miraflores Palace to discuss bilateral relations—an event that highlighted Caracas’s reliance on foreign partnerships for political support. Shortly after that meeting, explosions were reported across Caracas.
The event went beyond a simple arrest; it sent a broader strategic message, particularly to countries like China and Iran, undermining the belief that the U.S. would refrain from acting against governments supported by foreign adversaries.
Drill, Baby, Drill
A major strategic factor behind U.S. actions in Venezuela appears to be securing access to its vast energy resources. Venezuela sits on the largest proven oil reserves on the planet, with estimates from Wood Mackenzie suggesting roughly 241 billion barrels of recoverable crude, making it a uniquely significant player in global oil markets.
Top Countries by Proven Oil Reserves (Billion Barrels)
However, Venezuela’s track record of oil output underscores just how challenging it has been to tap into its vast reserves. In the late 1990s and early 2000s, the nation was capable of producing close to 3 million barrels per day—a level that made it one of the world’s top crude exporters. But political turmoil, labor strikes, and the restructuring of the oil sector under Hugo Chávez triggered a prolonged decline. The downturn was steepened further by U.S. sanctions starting in 2017, which restricted investment, technology, and exports, driving production down sharply. After bottoming out around 374,000–500,000 bpd during the worst of the crisis, output has only modestly recovered in recent years and remains in the range of approximately 800,000–900,000 bpd.
Historical Total Venezuelan Supply
Expectations that Venezuelan oil output could quickly rebound may overstate what’s realistically achievable. History shows that even after major disruptions, rebuilding oil production takes many years and vast investment. For example, Iraq needed almost a decade and well over $200 billion in capital to restore its output after the Iraq War, while Libya still has not returned to its pre‑2011 production levels.
Venezuela’s challenges are even more severe. Most of its reserves are extra‑heavy crude that demands upgrading and blending with diluents before it can be transported and refined, a costly and technical process. Years of underinvestment, international sanctions, the erosion of PDVSA’s workforce, and the deterioration of infrastructure have compounded these production hurdles. Pipelines, upgraders, and refineries have been left in poor condition, and limited access to modern technology continues to restrict any rapid recovery.
While PDVSA has claimed that facilities were not physically damaged in recent events—suggesting limited short‑term disruption—oil markets appear capable of absorbing this uncertainty for now. Inventories remain ample, and OPEC+ has signalled that its voluntary cuts of around 1.65 million bpd could be reversed if necessary to balance markets.
In a scenario where a pro‑U.S. government enables sanctions relief and attracts foreign investment, Venezuelan exports could gradually recover. But bringing production back to around 3 million bpd would take many years and substantial infrastructure upgrades. U.S. leadership has indicated that American oil companies would play a role in operating and developing Venezuela’s oil sector, though analysts note that the heavy crude’s technical challenges and investment risks remain significant.
Meanwhile, global oil markets are structurally tightening, with world consumption exceeding 101 million bpd driven by demand growth in the U.S., China, and India. Any short‑term impact on supply may show up as a modest increase in geopolitical risk premiums, but over time, the sidelined Venezuelan barrels—currently producing around 800,000–900,000 bpd—could eventually add supply and influence prices if output scales up gradually.
In addition to oil, Venezuela sits on a wealth of mineral resources. Large deposits of iron ore, bauxite, gold, nickel, copper, zinc and other metallic minerals are concentrated mainly in the southern Guayana Shield region. The country also ranks among Latin America’s largest holders of gold, and geological assessments identify significant iron and bauxite resources alongside reserves of coal, antimony, molybdenum and other base metals.
Despite this geological potential, commercial mining activity remains very limited. Most non‑oil mineral sectors contribute only a tiny fraction of Venezuela’s economic output, and substantial foreign investment has largely been absent, meaning much of the nation’s mineral wealth has yet to be developed into large‑scale production.
The Ongoing Economic Battle Between the United States and China
Competition between modern empires today is no longer about direct confrontation but about control over key inputs. Energy, metals, and critical materials form the foundation of the modern world. When leaders signal a willingness to secure these resources directly, markets should interpret this not as mere rhetoric, but as a concrete resource strategy.
The rivalry between the United States and China is fundamentally structural rather than ideological. The U.S. is rich in energy but dependent on imported metals and rare earths. China dominates metals processing but imports around 70% of its crude oil. Each side is strong where the other is vulnerable, and both seek to turn this imbalance into strategic advantage.
Control over energy flows also carries monetary implications. Influence over Venezuelan oil is not only about supply, but also about reinforcing the petrodollar and preventing the rise of the petroyuan.
There is also a regional dimension to this rivalry. China has steadily increased its presence in Latin America through infrastructure projects and commodity-backed financing. Recent U.S. moves indicate an effort to reassert dominance in the Western Hemisphere, compelling Beijing to compete on less advantageous terms. The Trump administration’s 2025 National Security Strategy elevated the region to a core priority, effectively reviving the logic of the Monroe Doctrine—rebranded as the “Donroe Doctrine.” The aim is to bring strategically important natural resources, especially critical minerals and rare earths, under U.S.-aligned corporate control while building a hemisphere-wide supply chain that reduces dependence on China.
Across much of South America, governments are edging closer to Washington, leaving Brazil increasingly isolated. This is significant given President Lula’s openly left-leaning stance and his consistent alignment with Russia, China, and Iran. Following Trump’s capture of Maduro, betting markets on Kalshi assign a 90% probability that the presidents of Colombia and Peru will be out of office before 2027. At the same time, President Trump has again stated that Greenland should become part of the United States, reinforcing a broader strategy centered on securing critical assets.
Which Assets Could Gain from “Nation Building” in Venezuela?
A political transition in Venezuela would most directly benefit assets tied to sovereign debt restructuring, energy infrastructure, and the oil supply chain.
Venezuelan bonds are currently priced at roughly 25–35 cents on the dollar, reflecting the impact of sanctions and ongoing legal uncertainty. Under a regime-change scenario, several analysts project potential recoveries in the 30–55 cent range, supported by the prospects of debt restructuring and the easing or removal of sanctions.
Ashmore continues to rank among the largest institutional holders of Venezuelan sovereign debt. Advisory firms such as Houlihan Lokey—financial adviser to the Venezuela Creditor Committee—and Lazard, a veteran of major sovereign restructurings (including Greece and Ukraine), would likely stand to gain from the sheer scale and complexity of any debt workout. In such processes, advisers typically earn success-based fees and function as the “picks and shovels” of restructuring. Venezuela’s debt structure is widely regarded as one of the most intricate ever assembled.
Reviving Venezuela’s oil industry would demand swift rehabilitation of aging infrastructure. Technip, which historically designed much of the country’s core oil facilities, is well placed to play a leading role given its proprietary expertise—particularly if emergency repairs are fast-tracked through sole-source or no-bid contracts. Graham Corporation, a supplier of vacuum ejector systems used in heavy-oil upgrading and refining, could also benefit, since Venezuela’s crude requires vacuum distillation to prevent it from solidifying into coke.
Before exports can meaningfully increase, Venezuela will need to import substantial volumes of diluent (such as naphtha or natural gasoline) to transport its heavy crude through pipelines. Targa Resources, operator of the Galena Park Marine Terminal in Houston—a major LPG and naphtha export hub—would be a natural beneficiary if Venezuela pivots back to U.S. diluent supplies, replacing current inflows from Iran.
The clearest corporate beneficiary of regime change and nation-building in Venezuela is Chevron (NYSE: CVX). Unlike other U.S. energy majors that exited the country, Chevron has maintained an on-the-ground presence. It retains the workforce, regulatory approvals (through OFAC), and operational assets—most notably Petroboscan and Petropiar—that position it to scale up production quickly. Exxon Mobil (NYSE: XOM) and ConocoPhillips (NYSE: COP), both of which hold legacy claims and arbitration awards stemming from past expropriations, could also regain market access or pursue compensation under a revised legal and political framework.
Refiners along the U.S. Gulf Coast—such as Valero Energy (NYSE: VLO), Phillips 66 (NYSE: PSX), and Marathon Petroleum (NYSE: MPC)—were purpose-built to handle heavy, sour crude like that produced in Venezuela. Since the imposition of sanctions, these companies have had to rely on costlier substitute feedstocks. A resumption of Venezuelan supply would reduce input costs and support refining margins, assuming end-product demand remains stable.
At the sector level, a significant increase in Venezuelan output would likely weigh on oil prices, which would be negative for crude producers but positive for consumer-oriented equities. Lower energy prices are inherently deflationary and could translate into lower bond yields—conditions that are generally supportive of risk assets, all else equal.
Note: This section is for analytical purposes only and does not constitute investment advice.
Venezuela: What Comes Next for the Economy and Markets?
In a characteristically Trump-like approach, President Trump initially stated that the United States would “administer” Venezuela during the transition period. U.S. officials later confirmed that approximately 15,000 troops would remain stationed in the Caribbean, with the option of further intervention if the interim authorities in Caracas failed to comply with Washington’s demands.
Venezuela’s Supreme Court subsequently named Vice President Delcy Rodríguez as interim president. A close ally of Maduro since 2018, Rodríguez previously oversaw much of the oil-dependent economy and the country’s intelligence structures, placing her firmly within the existing power framework. She signaled a willingness “to cooperate” with the Trump administration, hinting at a potentially dramatic reset in relations between the two long-hostile governments.
International observers, including the United Nations and the Carter Center, have concluded that Venezuela’s 2024 elections lacked legitimacy and fell short of international standards. Independently verified tally sheets reviewed by analysts indicated that opposition candidate Edmundo González secured around 67% of the vote, compared with roughly 30% for Maduro.
At the same time, María Corina Machado—Nobel Peace Prize laureate and a leading figure in Venezuela’s opposition—is expected to return to the country later this month and has said the opposition is ready to take power. President Trump, however, has publicly cast doubt on the breadth of her support among the Venezuelan population.
In this context, three potential scenarios appear likely, as outlined by Gavekal Research:
“Soft” Military Rule
In the near term, the most probable outcome is the continuation of the current power structure under Rodríguez and the armed forces. For this arrangement to endure, it would likely require a pragmatic shift toward U.S. priorities—embracing a more business-friendly approach and loosening ties with traditional partners such as Russia, China, and Iran. Washington may be willing to accept this scenario if it ensures political stability and reliable access to energy supplies.
Democratic Transition
A negotiated move toward civilian governance would hinge largely on how new elections are structured. Allowing participation from the Venezuelan diaspora could significantly reshape the results, whereas restricting voting to residents inside the country would be more likely to benefit factions linked to the existing regime.
“Libya Redux” (State Breakdown)
The most destabilizing scenario would involve the collapse of central authority, triggering internal military conflict and the proliferation of armed groups. Such an outcome would heighten the risk of civil strife, renewed migration pressures, and severe disruptions to oil production and global energy markets.
Markets are increasingly overlooking geopolitical issues—including developments in Venezuela and Greenland—while economic data is set to reclaim its role as the primary market driver in the latter half of the week. Today’s releases of ADP, JOLTS, and ISM services carry downside risks for the US dollar. Expectations of further rate cuts also point to softer FX performance in Central and Eastern Europe.
USD: Data May Weigh on Momentum
The impact of the Venezuela shock has largely dissipated. Although oil prices eased yesterday, they remain close to pre-4 January levels, equities continued to advance, and FX markets have shifted focus away from geopolitics. This reflects a post-“Liberation Day” tendency to ignore headlines and adopt a more measured outlook.
The dollar recovered modestly yesterday, likely supported by seasonal inflows and a slight rise in front-end swap rates rather than geopolitical factors. Unless the US intensifies its stance on Greenland or intervenes again in Venezuela, markets are expected to re-center on macro data in the second half of the week.
Today’s ISM services index is anticipated to be weak, but price action will likely be driven more by ADP (consensus: 50k) and the JOLTS job openings data. Notably, ADP has undershot expectations in seven of the past ten releases. Given our dovish view on the US labor market, we see upcoming employment data as carrying asymmetric downside risks for the dollar.
Looking beyond today, our near-term outlook remains neutral to slightly constructive on the greenback.
EUR: Inflation Risks to the Downside, but ECB Outlook Largely Unchanged
German inflation undershot consensus yesterday, decelerating to 1.8% YoY (2.0% in EU harmonised terms). As our economist notes here, the disinflation appears broad-based – i.e., beyond the base effect – with prices falling in leisure, clothing, and food.
That raises the chance of a sub-2.0% print today (consensus is at 2.0%) for the eurozone CPI flash estimate. Expectations are for the core CPI to remain unchanged at 2.4%, though; that is a measure that needs to start trending lower more decisively to revive any dovish dissent within the ECB.
For now, implications for ECB rate expectations are likely to be limited unless inflation starts undershooting materially and consistently. By extension, the euro may not be taking many cues from the print and will remain almost entirely driven by the US dollar leg.
The Australian Dollar gains ground amid a hawkish outlook on the Reserve Bank of Australia (RBA).
Australia’s CPI slowed to 3.4% year-over-year in November, below expectations but still above the RBA’s target range.
Traders now turn their attention to Wednesday’s US ISM Services PMI and JOLTs job openings reports for further market cues.
The Australian Dollar (AUD) extended its winning streak for the fourth consecutive session on Wednesday, gaining against the US Dollar (USD) despite easing inflation figures for November. Traders are now focused on the upcoming full fourth-quarter inflation report due later this month. Analysts caution that a core inflation increase of 0.9% or more could prompt the Reserve Bank of Australia (RBA) to consider further tightening at its February meeting.
Meanwhile, the Australian Financial Review (AFR) highlighted that the RBA may not be finished with its rate hikes this cycle. A recent poll suggests inflation is likely to remain persistently high over the coming year, supporting expectations for at least two more rate increases.
The Australian Bureau of Statistics (ABS) reported on Wednesday that Australia’s Consumer Price Index (CPI) rose 3.4% year-over-year (YoY) in November, easing from 3.8% in October. This figure missed market expectations of 3.7% but stayed above the Reserve Bank of Australia’s (RBA) target range of 2–3%. It marked the lowest inflation rate since August, with housing costs rising at their slowest pace in three months.
Month-on-month (MoM), Australia’s CPI remained flat at 0% in November, matching October’s reading. Meanwhile, the RBA’s Trimmed Mean CPI increased 0.3% MoM and 3.2% YoY. In a separate report, seasonally adjusted building permits surged 15.2% MoM to a near four-year high of 18,406 units in November 2025, bouncing back from a downwardly revised 6.1% decline the previous month. Annual approvals jumped 20.2%, reversing a revised 1.1% drop in October.
US Dollar declines ahead of ISM Services PMI
The US Dollar Index (DXY), which tracks the US Dollar’s value against six key currencies, is slightly declining after posting small gains in the previous session, currently hovering near 98.50. Market participants are awaiting US economic releases that may influence Federal Reserve (Fed) policy outlooks. Later today, attention will be on the ISM Services Purchasing Managers’ Index (PMI) and JOLTs job openings data. The upcoming US Nonfarm Payrolls (NFP) report, due Friday, is forecasted to show an increase of 55,000 jobs in December, a decrease from 64,000 in November.
Fed Governor Stephen Miran stated on Tuesday that the central bank should pursue aggressive interest rate cuts this year to bolster economic growth. Conversely, Minneapolis Fed President Neel Kashkari cautioned that unemployment could unexpectedly rise. Richmond Fed President Tom Barkin, who is not voting on this year’s rate decisions, emphasized that rate changes will need to be carefully calibrated to incoming data, pointing to risks affecting both employment and inflation targets, per Reuters.
According to CME Group’s FedWatch tool, futures markets assign roughly an 82.8% chance that the Fed will keep rates steady at the January 27–28 meeting.
On the geopolitical front, the US launched a significant military strike on Venezuela last Saturday. President Donald Trump announced that Venezuelan President Nicolas Maduro and his wife were captured and removed from the country. However, Maduro pleaded not guilty on Monday to US narcotics-terrorism charges, signaling a high-stakes legal confrontation with wide geopolitical consequences, Bloomberg reports.
Traders anticipate two more Fed rate cuts in 2026. Markets also expect Trump to nominate a new Fed chair to succeed Jerome Powell when his term expires in May, potentially steering monetary policy toward lower rates.
In China, the Services PMI from RatingDog fell slightly to 52.0 in December from 52.1 in November, while Manufacturing PMI rose to 50.1 from 49.9 the previous month. Given China’s close trade ties with Australia, shifts in the Chinese economy may affect the Australian Dollar.
The Reserve Bank of Australia’s December meeting minutes revealed readiness to tighten monetary policy further if inflation does not ease as expected. Greater attention is now on the Q4 Consumer Price Index report scheduled for January 28, with analysts warning that a stronger-than-anticipated core inflation figure could prompt a rate hike at the RBA’s February 3 meeting.
The Australian Dollar has reached new 14-month highs, climbing above the 0.6750 level
On Wednesday, AUD/USD is trading near 0.6750. Technical analysis of the daily chart shows the pair moving upward within an ascending channel, indicating a continued bullish trend. However, the 14-day Relative Strength Index (RSI) at 70 signals that the pair may be overbought.
Since October 2024, AUD/USD has hit new highs and is now aiming for the upper boundary of the ascending channel around 0.6830.
Initial support is found at the nine-day Exponential Moving Average (EMA) near 0.6708, followed by the lower boundary of the ascending channel at about 0.6700. A drop below this combined support zone could push the pair down toward the 50-day EMA level at approximately 0.6625.
Japanese Yen bulls stay cautious amid fiscal concerns and a generally positive risk environment.
Diverging expectations between the Bank of Japan and the Federal Reserve help contain further losses for the lower-yielding yen.
Meanwhile, subdued follow-through buying of the US dollar keeps USD/JPY capped ahead of upcoming US economic data.
The Japanese Yen (JPY) remains under pressure against the US dollar during Wednesday’s Asian session, though significant depreciation remains limited. Key factors weighing on the yen include Japan’s fiscal concerns, a broadly risk-on market sentiment, and uncertainty around the timing of the Bank of Japan’s (BoJ) next rate hike.
Despite this, the BoJ is expected to continue its policy normalization, creating a notable divergence from growing expectations of additional interest rate cuts by the US Federal Reserve (Fed). This divergence helps cap gains in the US dollar and offers some support to the lower-yielding yen. Additionally, speculation about possible intervention by authorities to support the yen calls for caution among those betting on further yen weakness.
The Japanese Yen struggles to attract buyers as a mix of factors counterbalance expectations for Bank of Japan rate hikes.
Japan’s fiscal outlook remains a concern, especially after the cabinet approved Prime Minister Sanae Takaichi’s record ¥122.3 trillion budget. Meanwhile, uncertainty persists over the timing of the next Bank of Japan (BoJ) rate hike, as expectations that energy subsidies, stable rice prices, and low petroleum costs will keep inflation subdued through 2026.
BoJ Governor Kazuo Ueda stated on Monday that the central bank will continue raising rates if economic and price trends align with forecasts. He emphasized that adjusting monetary support will help sustain growth, and moderate, synchronized rises in wages and prices leave room for further policy tightening.
This outlook pushed yields on Japan’s rate-sensitive two-year and benchmark 10-year government bonds to their highest levels since 1996 and 1999, respectively. The narrowing yield gap between Japan and other major economies has discouraged aggressive bearish bets on the yen, especially amid speculation of possible intervention.
The US dollar has struggled to build on gains from the previous day due to dovish Federal Reserve expectations and concerns about the Fed’s independence under President Donald Trump’s administration. Traders are also holding back, awaiting key US economic data for clearer signals on the Fed’s rate cut trajectory.
Wednesday’s US economic calendar includes the ADP private-sector employment report, ISM Services PMI, and JOLTS Job Openings. However, attention will largely focus on Friday’s Nonfarm Payrolls (NFP) report, which is expected to be crucial in shaping the next directional move for the dollar ahead of Tuesday’s US consumer inflation data.
USD/JPY’s mixed technical signals call for caution, with the key 156.15 confluence level serving as a crucial test for bullish momentum.
The USD/JPY pair’s overnight rally confirmed support at the 156.15 confluence zone, which combines the 100-period Simple Moving Average (SMA) on the 4-hour chart with the lower boundary of a short-term ascending channel. This level is crucial—if decisively broken, it could trigger renewed bearish momentum and open the door to deeper declines.
The Moving Average Convergence Divergence (MACD) histogram is slightly negative but contracting near the zero line, indicating weakening bearish pressure. Meanwhile, the Relative Strength Index (RSI) stands at 52, showing a neutral stance with a slight bullish bias. The rising SMA favors a buy-on-dips approach, though the subdued MACD suggests limited follow-through at this stage. RSI near the midpoint reinforces a consolidative phase within the channel.
Initial support remains at the 156.15 confluence, while resistance is positioned at 157.15—the channel’s upper boundary. A close above 157.15 could trigger further upside, whereas failure to break this level would keep USD/JPY range-bound within the rising corridor.
EUR/USD retreats toward 1.1710 after being rejected near 1.1740, giving back recent gains as downward revisions to Eurozone PMIs and softer German inflation renew selling pressure on the euro. With investors now awaiting key US labor market data, expectations for Federal Reserve monetary policy remain a major driver for the euro dollar exchange rate.
EUR/USD trades in a volatile market on Tuesday, hovering around 1.1710 at the time of writing, down 0.15% on the day. The pair has surrendered earlier gains as weaker Eurozone economic data revives concerns over the region’s growth outlook.
Selling pressure on the euro intensified after the downward revision of the Eurozone HCOB Services Purchasing Managers Index (PMI). The index was revised to 52.4 for December, below the preliminary estimate of 52.6 and down from 53.1 in November, signaling a slowdown in services sector activity—one of the main drivers of the European economy.
Meanwhile, German inflation data released on Tuesday point to a clear easing in price pressures. Annual CPI inflation slowed to 1.8% in December from 2.3% in November, while the Harmonized Index of Consumer Prices (HICP) dropped to 2.0% from 2.6%, coming in below market expectations. These readings reinforce expectations of a more subdued inflation environment across the Eurozone, limiting near-term upside for the euro.
On the US front, economic releases have also added to volatility in EUR/USD trading. The Services PMI was revised down to 52.5 in December, its lowest level in eight months, while the Composite PMI slipped to 52.7. According to S&P Global, softer demand, weaker new orders, and slower employment growth signal that the US economy is losing momentum, even as cost pressures remain elevated.
As a result, expectations for US monetary policy remain a key driver of the euro-dollar pair. Fed Governor Stephen Miran said on Tuesday that upcoming data are likely to support further interest rate cuts, arguing that the Federal Reserve could lower rates by more than 100 basis points this year as current policy remains restrictive and continues to weigh on economic growth.
Overall, EUR/USD continues to trade amid mixed macroeconomic signals from both sides of the Atlantic. With no clear near-term catalyst, price action remains uneven, while investors now turn their focus to upcoming US labor market data to better gauge the timing of potential Federal Reserve easing and the short-term direction of the US dollar.
The entire crypto market, tracking over 18,000 tokens across centralized and decentralized exchanges, is currently valued at nearly $3 trillion. This represents a 31% decline from the all-time high of $4.37 trillion recorded in early October, just before the recent crypto market crash.
Bitcoin, the largest cryptocurrency by market cap, is hovering around $88,000, accounting for more than half of the total market value at $1.77 trillion. Despite its dominant position, Bitcoin is poised to end the year with a negative annual return.
Since 2012, this marks the fourth year Bitcoin has underperformed, albeit by a significantly smaller margin compared to previous down years. For context, Bitcoin’s annual losses were -50.2% in 2014, -72.1% in 2018, and -62% in 2022. If Bitcoin maintains its current price level near $88,000, its annual underperformance in 2025 would be the “best of the worst” at around -6%.
Compared to Bitcoin, traditional asset classes like stocks and gold/silver have delivered substantially better returns this year on average. This contrast raises important questions about crypto’s position and outlook heading into 2026.
Is the Crypto Market Mature Enough for Significant Exposure?
The core purpose of the blockchain ecosystem is to transform the traditional money system through trustless finance. In simple terms, it leverages advances in cryptography combined with a full software stack to make transacting value as seamless as sending a message on an app.
While online banking and payment processors like PayPal have long provided similar convenience, the blockchain ecosystem offers a fundamental overhaul. Instead of relying on a single intermediary that acts as a bottleneck, automated smart contracts on an immutable ledger—the blockchain—execute all value transfers autonomously.
This decentralized approach eliminates single points of failure, increases transparency, and enhances security, paving the way for a new era of financial innovation.
This newly reinvented financial system—decentralized finance (DeFi)—has shown tremendous promise. Its total value locked (TVL) skyrocketed from $600 million in 2020 to $176 billion by late 2021, marking an astonishing growth of over 29,000%. Such rapid expansion is a clear indicator of a nascent industry emerging.
However, following the FTX collapse in late 2022 and a wave of bankruptcies among overleveraged crypto ventures, DeFi’s TVL has stabilized around $50 billion for the past two years. It was only after President Trump’s second term and the removal of the previously antagonistic SEC Chair Gary Gensler that DeFi began to recover, reaching approximately $168 billion TVL in early October.
Looking at this entire period from 2020 to now, several key conclusions emerge:
Without active institutional and legislative support, blockchain finance risks remaining confined to the enthusiast fringe. Like many cultural phenomena, mass adoption tends to be top-down driven, as exemplified by Elon Musk’s influence on Dogecoin’s surge.
One major hurdle to crypto’s wider adoption is the inflation of new tokens, which fuels recurring boom-and-bust cycles. This token oversupply undermines investor attention, market legitimacy, and overall capital efficiency.
The current ecosystem—where tokens are staked to earn more tokens in a closed-loop, casino-like economy—must give way to real utility derived from external value rather than internal dilution.
Moreover, Web3 crypto usage remains far from user-friendly and secure, with frequent incidents like bridge hacks and wallet incompatibility. According to Chainalysis, over $3.4 billion in crypto funds were stolen in 2025 alone. Ideally, blockchain finance should be so seamless that users are unaware they’re interacting with decentralized technology.
Notably, the market rally following the removal of SEC Chair Gary Gensler signals that blockchain’s underlying value hinges on how well it integrates with the broader, compliance-driven economy. As such, 2026 is shaping up to be a pivotal year for crypto’s maturity and mainstream acceptance.
Bitcoin and Stablecoin-Based Institutional Integration: The 2026 Catalyst
While DeFi protocols sought to establish dominance, new intermediaries such as foundations, early adopters, venture capitalists, and miners quickly asserted control. Despite the promise of decentralization, the ease of creating new tokens generated persistent dilution pressure across the crypto ecosystem.
Bitcoin, however, avoided this recursive dilution trap by imposing a physical energy barrier through its proof-of-work algorithm. This barrier limits token creation ex-nihilo, allowing Bitcoin’s network effect to remain robust. Following the October market crash, Bitcoin’s mining difficulty held steady, even increasing before stabilizing at pre-crash levels as the price hovered around $88,000 towards year-end.
Amid rising inflation fears, geopolitical tensions, and trade conflicts, gold and silver have regained their status as trusted hedges. Nevertheless, Bitcoin’s deterministic scarcity and digital-native nature position it uniquely for the modern economy, contrasting with gold’s pseudoscarcity.
Although many financial institutions underestimated Bitcoin’s 2025 price — with forecasts from Standard Chartered ($200k), VanEck ($180k), JPMorgan ($165k), Bernstein ($200k), and Fundstrat ($250k) — these projections may be delayed signals for 2026. As of early December, JPMorgan analysts suggested Bitcoin could reach $170k in 2026, assuming it begins to trade similarly to gold.
Moreover, recent research from K33 indicates that selling pressure from long-term holders (LTH) is nearing exhaustion. If this holds true, Bitcoin is poised to lead a renewed altcoin market rally in 2026, but with some notable distinctions:
The full implementation of the EU’s Markets in Crypto-Assets (MiCA) regulation will channel the majority of European crypto trading volume into regulated entities, while simultaneously triggering a flight of activity to less restrictive jurisdictions.
Meanwhile, tokenized stocks are poised for wider adoption as the US clears key regulatory hurdles. Notably, SEC Chair Paul Atkins issued a no-action letter to the Depository Trust Company (DTC) to facilitate the rollout of tokenized securities. However, offerings from platforms like Robinhood, Kraken, and Dinari remain heavily geo-restricted.
As the EU seeks to curb USD-based stablecoin flows—evidenced by Kraken’s fiat-only tokenized stock trading—the US stands to gain renewed competitive advantage.
Institutional oversight in the US is becoming increasingly crypto-friendly, likely aiming to solidify USD dominance via stablecoins. For example, the Basel Committee on Banking Supervision (BCBS) is revising its rules on banks’ exposure to cryptocurrencies. Together with more accommodating regulators such as the FDIC and OCC, it is now highly likely that US banks will hold cryptocurrencies in 2026.
Following the passage of the GENIUS Act, stablecoin flows are expected to significantly boost the broader crypto market. On one side, Circle’s upcoming Arc blockchain—backed by Blackrock, Visa, and Amazon—will support institutional stablecoin settlements. On the other, stablecoins are rapidly becoming the primary consumer-facing crypto product.
While MiCA’s vague definition of “decentralization on a spectrum” may hinder true DeFi innovation, it nonetheless accelerates capital formation around compliant crypto primitives.
The Bottom Line
Since 2020, the crypto ecosystem has created transformative wealth but also faced setbacks due to excessive experimentation. The strict regulatory stance under SEC Chair Gary Gensler cooled early enthusiasm, turning much of crypto activity into speculative trading rather than real financial innovation.
Following President Trump’s SEC repeal of SAB 121, crypto entered a new phase of integration under traditional finance (TradFi) rules. Despite macroeconomic and geopolitical headwinds, crypto moves into 2026 on its most stable footing yet.
Unlike prior cycles dominated by retail sentiment, institutional investors — pension funds, insurers, and endowments — are expected to reduce volatility through spot ETFs and altcoin trusts on high-performance chains like Solana and Sui.
The rise of Real World Assets (RWA) will foster a unified liquidity layer, linking tokenized stocks, RWAs, and TradFi blockchain networks with DeFi protocols. In this emerging hybrid finance, stablecoins will be the backbone, enabling DeFi’s transformation into a regulated, compliant capital market.
Shares of auto giant Tesla Inc. closed lower for the fourth consecutive session on December 29, signaling a notable shift in momentum just days after the stock reached a fresh all-time high. Since that peak just before Christmas, Tesla shares have declined nearly 8%, marking a sharp reversal after a hard-fought rally.
The timing of Tesla’s recent pullback makes it particularly notable. In a market hovering near record highs, Tesla’s sudden loss of momentum just as it enters blue sky territory raises a critical question: is this a healthy pause or an early sign that the rally is losing steam?
Let’s explore the arguments on both sides.
A Pullback Was Always Possible Amid Tesla’s Rapid Rally
Tesla has surged more than 100% since April, with its longer-term uptrend remaining firmly intact. Even after the recent decline, the stock has not broken any major trend structures—it simply looks more pronounced coming off a record high. Many investors had anticipated the rally to accelerate after Tesla finally cleared long-term resistance, rather than pull back.
From a technical perspective, a pullback of this magnitude is normal and consistent with previous corrections the stock has experienced this year. The latest rally phase was largely one-directional, making profit-taking after major milestones expected.
Tesla’s shares could fall another 8% and still remain within the rising trend channel that has supported the stock since spring. Viewed this way, the recent selloff represents a period of digestion rather than a breakdown. Healthy uptrends rarely move in straight lines—something Tesla investors are all too familiar with.
This outlook is further supported by Tradesmith’s Health Indicator, a volatility-based measure of stock price strength. According to this indicator, Tesla (TSLA) stock has remained in the green zone for four consecutive months, signaling a healthy underlying trend despite recent pullbacks.
A Change in Tone Marks Shift in Market Sentiment Around Tesla Stock
While a pullback is normal after reaching an all-time high, four consecutive lower closes suggest there is more at play than just short-term profit-taking. The sustained selling pressure indicates that bears have firmly taken control from the bulls, with little defense visible so far.
The critical question now is whether buyers will quickly re-enter the market. If they do, this pullback may be seen as a buying opportunity for long-term investors. If not, the market could begin to reassess the remaining upside potential ahead of the next major catalyst—January’s earnings report.
Analyst Support Remains Strong as Tesla Navigates Recent Price Decline
Despite recent weakness, analyst conviction in Tesla remains firm. Over the past week, both RBC and Canaccord Genuity reaffirmed their Buy ratings on the stock. Canaccord Genuity even raised its price target to $551, implying roughly 20% upside from current levels.
These positive calls suggest that the recent selloff is a minor pullback within a larger, ongoing uptrend that still has significant room to grow, even if near-term price action appears uncomfortable. While Sell ratings, such as one from UBS Group last week, persist, they remain rare exceptions in an otherwise solid analyst consensus.
This broader trend of sustained analyst support is particularly important during periods of market uncertainty like the current one.
Why the Next Few Trading Sessions Are Crucial for Tesla Stock
Despite the ongoing pullback, it would be a mistake to dismiss the recent price action entirely. Runs of consecutive red days like this are rare for Tesla, especially so soon after hitting new highs. The fact that this is occurring while the broader market remains strong adds an extra layer of concern.
Tesla’s high valuation intensifies this tension. Trading with a price-to-earnings ratio above 300, the stock leaves little margin for error. Any sign of disappointment in the company’s upcoming earnings report at the end of January could lead to a swift selloff. Confidence, not just momentum, is now a crucial factor.
This makes the upcoming sessions particularly important. How Tesla performs through the remainder of the holiday week and into early January will provide vital clues about the health of the rally. Stabilization or a quick rebound would suggest the pullback is routine. Continued weakness, however, would encourage bearish sentiment and shift the narrative from consolidation to growing doubt.
THE ETERNAL SOVEREIGN 