market outlook

Market Summary and Key Outlook (as of May 26, 2025)

Josh

— 1 min read

Global Financial Condition Highlights

  • US credit downgrade and massive fiscal expansion (the “Big Beautiful Bill”) are eroding confidence in the dollar and bond markets.
  • Capital is rotating out of US assets – bonds down, equities soft, USD broadly weaker.
  • Asia-led dollar selling continues to confirm a “sell USD” regime.

Currencies & Forex Markets

  • USD (Broad): Bearish – driven by rising US yields on larger deficits, credit concerns, and lack of fiscal discipline.
  • EUR/USD: Bullish EUR – Jay Rally advised taking profits on EUR/USD shorts but expects renewed USD selling and upside for EUR once dust settles.
  • GBP/NZD: Neutral – no strong conviction; NZD may come under pressure if RBNZ delivers a dovish rate cut.
  • AUD/USD: Bullish AUD – risk-on resumed after Trump pushed out EU-tariff deadline;
  • USD/JPY: Bearish USD – JPY strength underpinned by potential repatriation of Japanese pension flows as JGB yields rise (3.66% vs near zero), and BOJ tightening cycle versus US fiscal stress.
  • CHF/JPY: Bullish JPY vs CHF – Sean Paris short CHF/JPY at the weekly open (SL 177.36, TP 166.00), anticipating SNB cuts into negative territory while BOJ hikes.
  • Bitcoin: Bullish – acting as a digital safe-haven alongside gold; short-term deleveraging on equity drops but higher long-term amid USD stress.

Major Asset & Equity Outlooks

  • Gold (XAU/USD): Strongly Bullish – buoyed by US debt explosion, tariff bluffs, lack of progress on Ukraine ceasefire, and Bridgewater’s sizable Q1 GLD position. Near-term consolidation after Trump’s tariff delay; expected to break above 3,400 and challenge 3,600–3,700.
  • S&P 500 & Equities: Slightly Bearish – distressed US yield moves and fiscal uncertainty offset seasonal strength (historical May 24–June 23 bias). Trump’s tariff negotiations may produce short-term rebounds, but underlying risk remains.
  • US Treasurys/Yields: Yields Up – limited Fed bond-buying, higher deficits, and credit worries are pushing yields higher, exacerbating capital outflows from equities and USD.

Summary

  • The US dollar is set for further weakness amid fiscal indiscipline, credit downgrades, and capital flight.
  • Gold and Bitcoin remain primary beneficiaries as safe-haven assets.
  • Equities are choppy with a mild bearish tilt, offset by seasonally strong windows into June.
  • JPY and AUD stand out among major FX; CHF under pressure versus JPY on policy divergence.

Overall: USD down, Gold & Bitcoin up, equities mixed/slightly bearish.

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