This outlook contains information correct as at 1400hr on 06 Jan 2025
2025 was a relatively tumultuous year. A re-ordering of the rules of trade, on top of transformational change in technology, demographics and climate, is remaking jobs, politics and lives. US President Trump has upended decades old World order as the US tossed aside norms on policy, economic, trade, fiscal, monetary and even health. President Trump started 2026 with a bang by using US military might to capture a sitting President of Venezuela, resulting in wide ranging geopolitical and economic ramifications.
Geopolitics
President Trump’s capture of Venezuela’s President begs many questions. Will Latin American and the Global South countries be intimidated into being wary of fostering closer economic ties to China and Russia? The US now effectively controls Venezuela’s 303 billion barrels of oil reserves, the World’s largest and thereby the oil price.
Will the US Economy Crash in 2026?
Politicisation of US economic data and the US Federal Reserve Bank has made the market sceptical of economic figures produced by the Congressional Budget Office. Will the next Federal Reserve Chairman be serious about inflation or will he bend to Trump?
Manufacturing activity has been in contraction for 10 straight months. Consumer sentiment remains depressed, inflation is sticky, job growth remains sluggish, and unemployment has hit 4.6%, highest since the Covid pandemic. The Committee for a Responsible Federal Budget reports that early FY 2026 borrowing trends indicate the US is “headed towards the deficit nearing USD2 trillion for the fiscal year” or about 100% of GDP.
However, Clive Crook of Bloomberg writes that the American economy is at the precipice of a revolution just as tectonic as the transition from farming to manufacturing, or from manufacturing to services. Artificial intelligence could be a defining factor. The outlook for 2026 therefore appears finely balanced, with elevated downside risks tempered by the potential for transformative productivity gains.
Central Bank Policies
In 2026, Central Banks look set to go their separate ways on interest rate policies. The US Federal Reserve is expected to cut at least two times. ECB and BoE appear to be biding time. BoJ is expected to tighten, and the Reserve Bank of Australia appears to have turned hawkish at its last MPC, hinting at a possible rate rise.
Stock Markets
“The pessimists have just been wronging for so long that people are kind of tired of that schtick,” said veteran market strategist and longtime bull Ed Yardeni. Given the near continuous breaking of records these past few years, it’s probably unsurprising to most that big banks and boutique investment shops are predicting US stock markets will rally in 2026. If it does, it would be the fourth straight year for such gains and mark the longest winning streak in nearly two decades.
Deglobalisation or Regrouping
With average tariffs of 15%, Bloomberg Economics says the global economy will now have to learn to live with American protectionism. Outside of America, will the other countries leverage on each other’s strengths through regional trade or inter country pacts?
China’s Economy
The annual Central Economic Work Conference (CEWC) pointed out that China’s economic development still faces many old problems and new challenges, domestic and external.
China has been peerless in confronting Donald Trump’s policies. However, it may face greater headwinds from the “Venezuelan factor”.
Cryptocurrencies and Precious Metals
Cryptos, as represented by Bitcoin, had a wild ride in 2025, hitting new highs and then crashing back down. Compared to Gold and Silver, it has underperformed. Will these assets lose investors’ favour in 2026? Silver has outperformed Gold by a wide margin in 2025; will investors switch their interest?
Oil prices are still under pressure, testing below USD55 per barrel in December.
Overnight US 10-Year Treasuries closed up 0.01% at 4.17% (2 Dec 4.09%), Australian 10-Year Govt Bonds were down 0.01% at 4.78% (2 Dec 4.61%) and Euro 10-Year Bonds closed down 0.03% at 2.87% (2 Dec 2.75%).
The US Dollar Index (DXY) has bottomed out since July 2025 and is starting to move up to challenge Resistance at 99.00. Technically, we are likely to see some USD strength in 2026.
USD Index (DXY)
In our last six-monthly update in Jul 2025, we indicated that “DXY is now heading for the 76.4% Fibonacci Support at 95.243, anticipating a weaker USD for the rest of 2025”. We were only partially right, The USD found strong support before the 76.4% Fibonacci Support of 95.243 and by late September 2025 was on its way up. We are now likely to see a stronger DXY in 2026.
Image Source: Bloomberg 06 Jan 2026
Sources: Bloomberg, MSNBC, Reuters, Morningstar, Business Times, 06 Jan 2026
The AUD has a positive 0.6% interest differential against the USD, and this has allowed AUDUSD to break above the strong Fibonacci Resistance zone at 0.6460 – 0.6600. Further support is provided by commodities with Gold, Silver and Copper rising to record prices. However, with China, a major market for Australia’s exports, still having big economic problems should limit AUD strength. AUDUSD might challenge the Fibonacci Resistance at 0.6750 and may eventually drop back.
EURUSD
On 18 Dec the ECB kept interest rates unchanged for the fourth consecutive meeting, following a cumulative 2.0% cut between Jun 2024 and Jun 2025. It also reiterated its data dependent meeting by meeting approach. EURUSD still suffers from current Euro zone problems of economic weakness and political uncertainty.
The correction lower to around 1.1150 Support did not happen, but EURUSD moved up to challenge Resistance at 1.1820. EURUSD is likely to be range bound between 1.1500 – 1.1820 for next few weeks with a downward bias.
Image Source: Bloomberg 06 Jan 2026
GBPUSD
The BoE cut its Bank Rate by 0.25% to 3.75% on 18 Dec, the sixth consecutive quarterly cut and signalled a gradual downward path for rates but warned future cuts will be “a closer call.” The labour market is softening, private sector wage growth is slowing and the unemployment rate rising to 5.1%. GBPUSD has moved up only because the market believes it is grossly undervalued especially against the EUR.
GBPUSD has broken above the long-term Resistance Zone at 1.3200 – 1.3400. GBPUSD may rise to challenge Resistance at 1.3650 but may likely turn back down to Support at 1.3400.
Image Source: Bloomberg 06 Jan 2026
USDJPY
The BoJ at its last scheduled Monetary Policy Meeting of 2025 on 19 Dec took a unanimous decision to raise its policy rate to 0.75% from 0.5% but this provided scant support for the JPY.
Retail investors continue to invest in foreign assets, with their net buying via investment trust funds hovering near 2024’s record high JPY9.4 trillion (USD60.3 bln). The flow of funds out of Japan puts weakening pressure on the JPY.
The deeper pullback for USDJPY did not happen and kept moving up the Uptrend Channel towards round figure target at 160.00. We do expect the uptrend to continue.
Image Source: Bloomberg 06 Jan 2026
USDSGD
Singapore’s economy in 2025 expanded by 4.8% (MTI estimate “around 4.0%”), surpassing 2024’s strong growth of 4.4%. The latest median forecast for Core inflation is 0.7%. We can expect the SGD to continue appreciating amid sustained foreign inflows and a resilient economy.
As expected, USDSGD ended 2025 just above 1.2800. For 2026, we can expect USDSGD to head towards the 1.2600 Support.
Image Source: Bloomberg 06 Jan 2026
AUDSGD
Against a bearish view, AUDSGD broke above the Resistance Zone at 0.8400 – 0.8500 and is now challenging Resistance at 0.8650. We do expect this Resistance to hold and AUDSGD to move back down to 0.8500. For 2026, AUDSGD is expected to trade mainly within the range of 0.8300 – 0.8650.
Image Source: Bloomberg 06 Jan 2026
XAUUSD
With continued geopolitical tensions and uncertainties Gold is expected to maintain its safe haven appeal and investors are eyeing new highs for 2026. Anecdotal evidence points to a slowdown in retail jewellery sales due to higher prices (highest use of Gold by volume) and this may be a drag on the Gold price in 2026.
The technical pull back to the 50-Days Moving Average and USD4,000 Support area did not happen as Gold continues to power up. Gold is likely to meet Resistance at USD4,500 level but with Support at around USD4,200, the 50-Days Moving Average.
Image Source: Bloomberg 06 Jan 2026
Note: In Candlesticks Chart, Green bars mean the Close is higher than the Open price and Brown bars mean the Close is lower than the Open price