Market Sector Scanner: Yen Weakness Dominates as BOJ Signals Caution and Holiday Volatility Looms
USD/JPY was the standout mover last week after the Bank of Japan signaled a slower pace of rate hikes. Gold continued to trade near record highs as demand for safe havens remained strong. With key U.S. data, BOJ events, and thin Christmas-week liquidity ahead, markets remain vulnerable to sharp and sudden moves.
USD/JPY was the biggest mover last week, rising sharply after the Bank of Japan signaled a slower pace of rate hikes. U.S. and Japanese equities fell as investors took profits after a strong year and AI valuation concerns persisted, while gold moved higher toward record levels. U.S. jobs data beat expectations and inflation came in lower than forecast, with the ECB holding rates and the Bank of England cutting.
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Key Events Calendar for December 22 – 26
Forex Market
USD/JPY
Last Week Recap
After moving lower ahead of the expected increase in Japanese interest rates at the Bank of Japan meeting, USD/JPY reversed sharply and returned to the highs of the year. The rebound followed comments from the BOJ Governor, whose statement suggested that future interest rate increases may proceed at a slower pace than markets had anticipated.
Technical Picture
The pair surged above the upper Bollinger Band but stalled just below the yearly highs. The 10-day moving average has turned slightly higher, reflecting renewed upside momentum as the market waits to see whether price can break to fresh highs for the year.
Outlook This Week
The Japanese government continues to express concern over the weak yen, but the lack of immediate action suggests buying pressure may persist. That said, traders should remain cautious, as the risk of a sharp pullback remains if the Bank of Japan intervenes—particularly during the quieter holiday trading period.
GBP/JPY
Last Week Recap
After the Bank of Japan meeting, GBP/JPY climbed to its highest level in 18 years. The move continued even after the Bank of England cut interest rates, as the cut was already expected by the market. U.K. manufacturing data came in better than forecast, while inflation was slightly weaker, which did not hurt the pound.
Technical Picture
Price moved strongly above the upper Bollinger Band, showing clear buying pressure. The 10-day moving average is still rising and continues to support the move higher, confirming that the trend remains positive.
Outlook This Week
Unless the Bank of Japan steps in to support the yen, the upward trend is likely to continue. Buying pullbacks toward the 10-day moving average still looks like the preferred strategy, while staying aware of the risk of sudden drops if intervention occurs.
EUR/USD
Last Week Recap
The European Central Bank kept interest rates unchanged, in line with expectations. At the same time, stronger-than-expected U.S. economic data supported the U.S. dollar. As a result, EUR/USD came under selling pressure and moved lower during the week.
Technical Picture
Early in the week, the upper Bollinger Band acted as resistance and signaled that the recent rally was losing momentum. The pair then pulled back toward the rising 10-day moving average, which has continued to provide support. This suggests the short-term trend is still positive, but upward momentum has slowed.
Outlook This Week
EUR/USD has risen strongly over the past month, so a pause or pullback would be normal. A clear move below the 10-day moving average would be a short-term sell signal. If price stays above this level, the upward trend is likely to continue, with U.S. data guiding the next move.
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Equities
U.S. Stock Market
Last Week Recap
The Nasdaq weakened early in the week as concerns over high AI valuations continued to pressure the market. Later in the week, prices rebounded after reports that the U.S. government may allow Nvidia to sell certain chips to China, helping lift sentiment into the close week.
Technical Picture
The late-week rebound pushed the index back toward the downward-sloping 10-day moving average, which continues to act as resistance. The lower Bollinger Band provided support during the week, suggesting selling pressure has eased, but the broader bias remains weak.
Outlook
The overall trend is still to the downside. Unless the Nasdaq can move clearly above the 10-day moving average, rallies are likely to be sold. With a relatively quiet week ahead, traders may continue to look for selling opportunities rather than chasing upside moves.
Commodities
Gold
Last Week Recap
In quiet trading conditions ahead of the year-end holidays, gold continued to move higher and traded close to record highs. Ongoing demand for diversification and safe-haven assets supported steady buying interest.
Technical Picture
Record highs and the upper Bollinger Band remain short-term resistance. However, the 10-day moving average continues to trend higher, confirming that the overall uptrend remains strong.
Outlook This Week
With holiday trading conditions, activity is likely to stay light. Even so, there is still a chance gold pushes to new highs as bullish sentiment remains firm. For now, focusing on buying opportunities continues to look more attractive than selling into resistance.
After last week’s sharp yen weakness, further moves could increase the risk of Bank of Japan intervention. Key U.S. data may still drive volatility, even as trading activity remains light. With many markets closed for Christmas, thin liquidity raises the risk of sudden price moves.
