The US dollar index ($DXY): From a technical point of view, I don’t know what to make of the US dollar index at the end of 2025. My Market Rule #1 tells us to not get crossways with the trend, and if trend is nothing more than price direction over time, then I would lean toward more weakening over the coming months. Newton’s First Law of Motion applied to markets says, “A trending market will stay in that trend until acted upon by an outside force”. So far, there has been no change in global investment interest (the outside force). Fundamentally, the idea the US Federal Open Market Committee will make at least two rate cuts this year could keep the US dollar under pressure. Theoretical Positions: If investors are still short the market, buy stops would be above the 99.97 settlement on a monthly close only order.
The Euro (^EURUSD): Similar to the US dollar index, I do not have a good technical read on the euro other than the First Rule of Markets and Newton’s First Law of motion applied to markets. Fundamentally, if the US dollar weakens due to rate cuts during 2026, the euro would be expected to strengthen. The key will be how the euro acts near its recent high monthly close of 1.17873 from June 2025 with key support levels at 1.15374 (October 2025) and 1.14150 (July 2025). Theoretical Positions: If still holding long positions, sell stops would be below the October 2025 low of 1.15374.
The euro/Canadian dollar (^EURCAD) looks to be in a state of changing trend after posting another lower monthly close at the end of December. This was the second lower monthly close since posting a high marks of 1.63332 at the end of September 2025. This could be one of those Newton’s First Law situation when an outside force is changing direction. Given this we need to be careful with the EURCAD as its major trend could be in the process of turning down. Theoretical Positions: It’s possible traders might’ve gone long near the August settlement of 1.60599. If so, these positions could be liquidated near the October settlement of 1.61659 for a gain of 0.0106. If new short positions are established, buy stops would be above the September settlement of 1.63332.
The Canadian dollar (^CADUSD) remains in a major uptrend. The loonie finished December at 0.72858, a gain of 1.84%. The key will be a possible move above its recent high monthly close of 0.73483 from June 2025. What could be the catalyst for an extended rally by the CADUSD? A global view that a replacement is needed for the US dollar index and the Canadian political and economic system seems more stable. Theoretical Positions: Investors would’ve bought back short Canadian dollar positions near the February settlement of 0.69125 and gone long at the same level. Additional buy orders could be established near the November settlement of 0.71542, creating an average long position of 0.70334.
The Brazilian real (^BRLUSD): The real could still be considered in a major downtrend following the December settlement of 0.18132, its lowest monthly close since July 2025’s 0.17855. Theoretical Positions: Investors may have rolled from long positions to short positions near the December settlement as it took out the October close of 0.18599.
