The key to trading successfully in 2025 is simple. It starts with tracking central bank rate changes.
This idea isn’t new nor revolutionary; central banks have always played a pivotal role in shaping market movements. Their policies act as the gravitational forces holding the market together, pulling currencies, equities, and commodities into alignment—or throwing them into disarray. We think this year will be no exception, as central banks attempt to steer a global economy marked by shifting policies, government leaders, and escalating geopolitical tensions.
The U.S. dollar will set the tone, as it often does. While we anticipate modest rate cuts from the Federal Reserve following its aggressive tightening cycle, the dollar’s story doesn’t end there. Its resilience, rooted in a robust U.S. economy and its enduring safe-haven status, makes it a candidate for selective buying. In our view, the dollar will likely find support during periods of pullback, offering traders opportunities to capitalise on dips while avoiding long-term bullish commitments.
In contrast, the euro faces a more precarious journey. With the European Central Bank likely to cut rates more aggressively, the euro could find itself under sustained pressure. We think this creates a clear opportunity for selling the euro on short-term rallies, particularly against stronger counterparts such as the dollar or the Japanese yen. The eurozone’s persistent economic fragility only underscores this bearish outlook.
The British pound presents a more balanced picture. The Bank of England’s measured approach to rate policy suggests relative stability, and we believe the pound could find its niche in cross-currency plays. Sterling may lack the dramatic movements seen elsewhere, but this very stability could make it attractive for traders seeking lower-risk opportunities.
Meanwhile, we see the Japanese yen as a currency on the rise, breaking free from decades of ultra-loose monetary policy. With the Bank of Japan signalling rate hikes—a rare phenomenon—the yen is positioned to strengthen against weaker peers. In our estimation, this shift marks the yen as a prime candidate for long positions, particularly against the euro and Canadian dollar.
The Swiss franc, however, appears to be charting a weaker course. We anticipate significant rate cuts from the Swiss National Bank, which could erode the franc’s traditional safe-haven appeal. For us, this opens the door to shorting the franc against currencies supported by stronger economic fundamentals.
Commodity-linked currencies like the Australian and New Zealand dollars offer a mix of opportunities. While rate cuts are expected in both economies, we think their resource-driven exports and higher relative yields will continue to attract medium-term buying interest. These currencies, in our view, are well-suited for pairs against more vulnerable counterparts, such as the euro and franc.
The Canadian dollar, on the other hand, faces challenges. With aggressive rate cuts expected and an economy sensitive to global demand, we believe the loonie is positioned for selling. Even potential support from oil prices may not be enough to offset the broader downward pressure, especially against stable or rising-rate currencies.
With these macroeconomic dynamics in mind, the question becomes: how do we put our best foot forward for 2025?
The U.S. Dollar Index (USDX) has held steady after last week’s upward move, trading near a critical resistance zone.
We believe this signals a potential period of consolidation, with price action likely to pivot around 108.15. If bullish momentum resumes, the index could test 109.60 or even 110.40. However, any failure to hold these levels might trigger a retracement, offering opportunities for tactical short-term plays.
The EUR/USD pair has found support just above the 1.0200 zone, a level we think remains pivotal for this week’s action. As the pair consolidates, bearish price action is worth monitoring near 1.0360 or 1.0410.
Should the euro make a new swing low, we believe opportunities for bullish reversals could emerge around 1.0035, making this a level to watch closely.
GBP/USD is coming off a bounce from the monitored 1.2360 level, with price now hovering near resistance at 1.2520.
In our view, consolidation in this area could lead to bearish setups, but a clean breakout may signal broader strength in sterling. Traders should remain flexible, as the pair could offer short-term range opportunities.
USD/JPY appears to be in consolidation mode after testing key resistance near 158.35. We think bearish price action at this level might lead to a temporary retreat, but any sustained move higher would align with the yen’s broader upward trajectory. This setup, in our estimation, is ideal for traders favouring short-term volatility.
USD/CHF, on the other hand, continues to trade in a narrow range. We think the area around 0.9050 is critical for support, while resistance near 0.9200 could act as a ceiling if the pair attempts to move higher. This consolidation phase may present breakout opportunities later in the week.
Oil prices, as reflected in USOil, continue to flirt with the 75.35 resistance level. We believe bearish price action here could lead to a temporary pullback, with potential support forming near 66.93 or even 65.50. Traders should monitor these zones for signs of reversal or continuation.
Gold remains in a downward trend, currently trading near 2,625. In our view, this level is pivotal. A sustained move higher could see the precious metal test 2,685, while a break lower might expose 2,583.
Price consolidation at these levels suggests a pivotal week for gold traders.
The S&P 500 has rebounded after taking out the 5,867 low. As it edges higher, we think price action near 5,970 or 6,025 will provide clues about its next move. Breakouts or failures in these areas could shape equity sentiment for the week.
Bitcoin has continued its upward trajectory, now approaching 101,800. We think this zone could trigger bearish price action, though further gains remain possible if buyers maintain momentum.
Any dip toward 91,000 could invite renewed interest, keeping the range lively for crypto traders.
On Monday, the German Preliminary CPI data will start the week with a forecast of a 0.3% rise, following the previous month’s contraction of -0.2%. This data could provide early strength to the EUR/USD, especially if the numbers come in higher than expected. A strong print would likely reinforce expectations of a less aggressive ECB rate cut trajectory, offering temporary support to the euro.
Tuesday brings a trifecta of significant releases. The Swiss CPI, expected at -0.1%, aligns with deflationary concerns. We think this could weigh on the CHF, reinforcing bearish positions in USD/CHF and EUR/CHF pairs. In the U.S., the ISM Services PMI, projected at 53.2 (up from 52.1), and the JOLTS Job Openings, expected at 7.77M, will be critical for gauging the resilience of the U.S. economy. We see these figures as pivotal for USDX and related pairs, especially if they support a narrative of robust economic activity amid softening inflation concerns.
On Wednesday, Australia takes centre stage with the release of its year-over-year CPI, forecasted at 2.2% compared to the previous 2.1%. For AUD/USD, this could be a game-changer. A higher-than-expected print might lift the Aussie, especially if paired with stronger commodity prices.
Friday promises action with the release of Canada’s Employment Change, anticipated at 24.5K compared to the prior 50.5K, and the U.S. Non-Farm Payrolls (NFP), projected at 154K, down from 227K previously. The Unemployment Rate is expected to hold steady at 4.2%. These figures will shape the CAD and USD narratives, with NFP data in particular often serving as a catalyst for broad market movements.
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