Closing Recap 

U.S. stock futures are pointing to a weaker open on Monday as a sharp rally in the Japanese yen and a looming government shutdown weigh on sentiment. The yen surged to its strongest level since November after Japanese and U.S. officials signaled a readiness to intervene in currency markets, a move that has put traders on high alert. This risk-off mood is being compounded by the high probability of another U.S. government shutdown at the end of the month. In commodities, gold and silver continue their spectacular run, with both metals hitting new all-time highs on a flight to safety and a weaker U.S. dollar. The crypto market was hit by another wave of selling, with fears of a shutdown spooking traders. 

Key Takeaways 

• Yen Soars on Joint Intervention Fears: The Japanese Yen is the standout performer in G10 FX, soaring after PM Takaichi’s warnings against “abnormal” moves were followed by reports of the New York Fed conducting “rate checks,” fueling speculation of a joint U.S.-Japan intervention.
• Futures Point to Lower Open: U.S. stock futures are in the red as the stronger yen, a looming government shutdown, and a busy week of earnings and Fed meetings create a cautious mood. 
• “Sell America” Trade Ignites, Dollar Tumbles: The escalating Trump-Fed feud has triggered a classic “Sell America” trade. The U.S. Dollar has plunged to a four-month low, and U.S. futures are down as investors question the stability of U.S. institutions.
• Another Government Shutdown Looms: In another layer of political risk, the U.S. government is on the brink of another shutdown, with a funding deadline on January 31st and an 85% probability of a closure, according to prediction markets.
• Gold and Silver Hit New All-Time Highs: Precious metals continue their blistering rally. Gold surged past the key $5,000 an ounce level to a new record, while silver also hit a fresh peak near $110. 
• Dollar Tumbles to 4-Month Low: The U.S. Dollar Index has fallen to its lowest level since September, weighed down by the yen’s strength, the shutdown threat, and speculation about a dovish new Fed Chair. 
• Silver Squeeze in China: A major new dynamic has emerged in the silver market, with the price premium in Shanghai surging to a record $16/oz over Western prices, signaling a severe physical shortage and massive domestic demand in China.
• “Big Tech” Earnings and Fed Meeting in Focus: The week is packed with major risk events, including earnings from Microsoft, Meta, Tesla, and Apple, as well as the FOMC’s first policy decision of the year. 
• Trump Threatens 100% Tariffs on Canada: Over the weekend, President Trump threatened to impose a 100% tariff on all Canadian goods if Ottawa signs a trade deal with China, a potentially catastrophic development for the Canadian economy.
•  Hedge Funds Most Bearish on Yen in a Decade: The yen’s sharp rally comes as leveraged funds have built up their largest net short position in the currency since 2024, setting the stage for a potentially massive short squeeze. 
• New Fed Chair Speculation Intensifies: Rumors are swirling that President Trump is close to picking BlackRock’s Rick Rieder as the next Fed Chair, a move that would likely herald a much more dovish policy stance. 
• Crypto Market Loses $100B on Shutdown Fears: The crypto market was hit by another wave of selling as fears of a U.S. government shutdown spooked traders, erasing $100 billion from the total market cap. 

Market Overview

The new trading week has begun with a sharp and decisive “risk-off” move, driven by a perfect storm of currency market turmoil and political uncertainty. The most significant development is the dramatic surge in the Japanese yen. After weeks of verbal warnings, a suspected “rate check” by Japanese and U.S. authorities on Friday, followed by a direct warning from Prime Minister Takaichi, has put the market on high alert for an imminent joint intervention. With hedge funds holding a near-record short position in the yen, the stage is set for a potentially violent and disorderly short squeeze. This currency market drama is being compounded by a return of political chaos in Washington.

Index	Up/Down	%	Last
DJ Industrials	-42	-0.0008	49057
S&P 500	-6.64	-0.001	6908
Nasdaq	-51	-0.002	25554
Russell 2000	(N/A)	–	2674

With government funding set to expire at the end of the week, the probability of another shutdown is now at 85%. This, combined with a new and potentially devastating trade war threat against Canada, is creating a highly uncertain environment for risk assets. The only beneficiaries of this turmoil are traditional safe havens. Gold and silver have exploded to new all-time highs as investors flee the U.S. dollar and seek protection from the geopolitical and institutional risks that are now front and center. With a packed slate of “Big Tech” earnings and a Federal Reserve meeting also on the docket this week, traders should be prepared for a period of extreme volatility.

Economic Calendar 

This week will see a flood of key economic data. However, the main focus is on the FOMC meeting and “Big Tech” earnings. There were no major economic data releases during the Asian session. Major Risk Events This Week: 

• U.S. Government Shutdown Deadline (Friday) 
• FOMC Interest Rate Decision (Wednesday) 
• “Big Tech” Earnings (Microsoft, Meta, Tesla, Apple) 
• U.S. January Consumer Confidence (Tuesday) 
• U.S. December PPI Inflation (Friday) 

Asset Class Spotlight: FX, Commodities, Bonds & Crypto

Safe havens explode higher, gold smashes through $5,000. The flight to safety is in full effect. Gold has surged to a new all-time high above $5,100, and Silver has also hit a new record, smashing through $109, as investors dump the dollar for hard assets. Gold and silver are the standout performers, with both metals surging to new all-time highs on a massive flight to safety. Spot gold has broken through the key $5,000 an ounce level, while silver has rocketed to near $110. The rally is being fueled by a perfect storm of geopolitical risk, a weaker U.S. dollar, and a flight from U.S. assets. Crude oil prices are holding steady near $61.00, with the market balancing the geopolitical risk from the U.S. “armada” heading towards Iran against ongoing supply concerns.

Asset	Up/Down	Unit / % Change	Last
WTI Crude	0.492	0.0081	61.562
Gold	92.13	0.0185	5079.79
Silver	4.627	0.0449	107.573
EUR/USD	-0.0016	-0.0013	1.1857
USD/JPY	-0.3	-0.0019	154.19
Bitcoin	1272	0.0147	87827
10-Year Note Yield	-0.017	-0.004	0.04216

The Japanese yen is the clear outperformer as intervention fears grip the market, while the U.S. dollar is plunging on a flight from U.S. assets. 

• USD/JPY: The pair has plunged below 154.00 –  its strongest level since November as the market prices in a high probability of a joint U.S.-Japan intervention to support the currency. The Yen is on a tear, benefiting from a “perfect storm” of safe-haven demand and a dramatic increase in intervention fears after reports of a New York Fed “rate check.” With hedge funds holding a near-record short position, the conditions are ripe for a massive short squeeze. A $1.0B options expiry at the 156.00 level provides a key resistance point.
• EUR/USD: The pair has jumped to a near four-year high, breaking above the 1.1900 level. The single currency is a major beneficiary of the “Sell America” trade, as investors flee the U.S. dollar. A minor $550M options expiry at the 1.1800 level sits below the current price.
• GBP/USD: The pound has also rallied strongly, climbing to its highest level since mid-September around 1.3660, driven by broad dollar weakness and some upbeat domestic data. 

Cryptocurrencies: The crypto market was hit hard by the risk-off mood and shutdown fears. The total market cap lost $100 billion over the weekend, with Bitcoin falling over 3% and Ethereum dropping more than 5%. The market is struggling to find a bottom as the broader risk-off mood and concerns about tightening global liquidity weigh on sentiment. U.S. Treasury yields are expected to fall as investors seek the safety of government bonds amidst the institutional and geopolitical turmoil.

Looking Ahead 

This week is shaping up to be one of the most volatile in recent memory. The market is facing a perfect storm of risks, from a potential U.S. government shutdown and a new trade war with Canada to a full-blown currency war with Japan. On top of that, a heavy slate of “Big Tech” earnings and the first FOMC meeting of the year will add to the uncertainty. Traders should be prepared for significant intraday swings and a potentially wild ride as these high-stakes events play out.

What to Watch Today: 

• The Trump-Fed War: This is the only story that matters. The unprecedented public feud and the threat of a criminal indictment against the Fed Chair have created a major institutional crisis. Any new headlines or developments will be the primary driver of volatility. 
• The Yen Intervention “Rate Check”: The report of the New York Fed conducting “rate checks” on the Yen is a major escalation. This is often a precursor to coordinated intervention and is a huge risk for the massive hedge fund short position in the currency. 
• The Precious Metals Parabola: The moves in Gold and Silver are historic but are also becoming extremely extended. The massive premium in Shanghai silver is a clear sign of a physical squeeze. While the underlying fundamentals are strong, the risk of a sharp, violent pullback on profit-taking is very high.