Errante’s The Week Ahead: 29 December – 02 January 2026

Highlights of the Week

• Holiday liquidity dominates: Thin volumes amplify price sensitivity to rates and macro headlines as markets drift into year-end.
• FOMC minutes set the tone for 2026 pricing: Markets will assess whether the December cut was an insurance move or the first step toward a broader easing cycle.
• US data as confirmation, not catalyst: Initial jobless claims and Chicago PMI will test the narrative of labor-market resilience alongside manufacturing weakness.

What Now

As markets enter the final full trading week of the year, liquidity, not information flow, becomes the dominant pricing force. With participation thinning sharply, price discovery turns fragile, and even secondary data or nuanced central-bank language can trigger outsized moves.

It’s the classic late-December mix with supportive seasonality and lighter positioning, but heightened sensitivity to rates, valuation discipline, and growth durability as 2026 narratives take shape.

The core regime remains US exceptionalism, strained but intact. Recession odds for 2026 have eased, yet the expansion is increasingly narrow: AI-led capex, resilient corporate margins, and a still-spending consumer are offsetting softer signals from housing, manufacturing, and hiring.

The composition matters as consumption is skewing toward higher-income cohorts, while inflation, cooler but sticky, keeps real rates restrictive. That mix continues to support the USD into year-end despite crowded positioning.

The FOMC minutes (Dec 30) are the week’s only true macro catalyst. Markets will parse whether the December cut was an “insurance” adjustment or the start of a broader easing path. Any emphasis on inflation persistence, asset-price excess, or AI-linked financial imbalances would reinforce a cautious Fed reaction function, re-anchoring higher-for-longer real-rate expectations, supporting the dollar, and capping equity upside into early 2026.

A more dovish tone, comfort with disinflation and labor softening, would reopen downside risk for USD and revive duration demand, but that is not the base case.

Later US releases are confirmation tools rather than regime-changers. Initial jobless claims will be watched for labor inflection, though year-end distortions matter; small rises likely won’t shift policy pricing.

Chicago PMI (prev. 36.3) should keep highlighting manufacturing contraction versus services/AI strength, with market impact limited unless the print surprises sharply.

Europe remains subdued as soft growth and only gradual disinflation leave EUR without a catalyst to outperform while US real yields stay elevated and risk appetite remains fragile, keeping EURUSD upside capped.

China’s Manufacturing PMI (prev. 49.2) will be read for direction more than level; another sub-50 outcome would reinforce persistent demand weakness and the broader theme of uneven global growth, still dependent on US-centric drivers rather than a synchronized recovery.

Market Events and Announcements (GMT+2)

Monday, December 29, 2025

• 17:30 – USD – Crude Oil Inventories (Prev: -1.274M)

Tuesday, December 30, 2025

• 23:30 – USD – FOMC Meeting Minutes

Wednesday, December 31, 2025

• 03:30 – CNY – Manufacturing PMI (Dec) (Prev: 49.2)
• 15:30 – USD – Initial Jobless Claims
• 16:45 – USD – Chicago PMI (Dec) (Prev: 36.3)

Thursday, January 1, 2026

• New Year Holiday

Friday, January 2, 2026

• 16:45 – USD – S&P Global Manufacturing PMI (Dec) (Prev: 51.8)

Market Insights: Key Charts to Watch

US100 (Nasdaq) – H4 chart – Rally Without Conviction

US100 is in a V-shaped recovery from the mid-December liquidation into the swing base around 24,628, followed by a strong mean-reversion rally and stabilization above the prior reclaim zone.

Main scenario:

As long as price holds above 25,416 on a closing basis, the base case remains a continuation toward 25,631, with scope to extend into 25,867 if liquidity remains supportive and volatility stays pinned.

Key levels

• Resistances: 25,631, then 25,867,
• Bullish reclaim/acceptance zone: 25,416
• supports: 25,248, 25,011, 24,628

Alternative scenario:

If US100 loses 25,416 and fails to reclaim it quickly, the structure shifts from continuation to range failure, opening a rotation back into 25,248, then 25,011. A deeper flush becomes realistic only if 25,011 breaks with expanding volatility.

VIX – Daily chart – Compressed but Vulnerable

VIX remains suppressed within a mild descending channel, consistent with risk complacency. However, ROC stabilization warns against assuming volatility has fully reset.

Main scenario:

If VIX stays below 14.85, the base case is continued low-vol regime, which typically supports US equity strength and limits downside follow-through in risk assets. In this environment, the “market tax” is complacency risk, trends persist but stop placement and position sizing matter because reversals can be fast.

Key levels

• Resistances: 14.85, 16.5
• Supports: 14.0, 13.2

Alternative scenario:

A move above 16.50–17.00 would signal risk repricing, likely driven by rates or unexpected macro shocks.

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