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- The Week in FX and Crypto: December 23, 2025
The Week in FX and Crypto: December 23, 2025
30 Years of Market Structure, Distilled Weekly.
mark schaefer
December 23, 2025
Market Structure Update
BTC:
Bitcoin continues working toward the 78K support test I've been mapping for weeks. The distribution data from Bloomberg last week (long-term holders exiting at fastest pace in 5 years - $300B back in circulation) supports the bearish structure playing out.
The bounce stopped at the 20-day moving average exactly. Bearish confluence with technical resistance aligning with fundamental selling pressure.
Holiday volatility is compressed, but the structure is clear: 78K represents the 38.2% Fibonacci retracement of the entire move from the cycle low. Either it holds and we get a meaningful bounce, or it breaks and forces a broader reassessment, with scope to test the 50% Fibonacci retracement. A sustained hold above the 20-day moving average would weaken the immediate bearish structure and open the door for a test of the 38.2% Fibonacci resistance at 98k.
USD Index:
Dollar trading sideways into year-end - typical holiday behavior. Cross-currents from central bank divergence this week (BOJ hiked, Fed and BOE cut, ECB and RBA held) are keeping things choppy but contained within ranges
The more interesting setup is what's developing in USD/JPY, which brings me to this week's deeper focus...
DEEP DIVE - JPY INTERVENTION RISK
The Setup:
The Bank of Japan hiked rates this week as expected, but the market response tells the real story. The JPY sold off despite the rate increase - a textbook example of "Buy the rumor, sell the fact.”
Here's what happened: The market front-ran the hike weeks ago (USD/JPY dropped from 157 to 154 in November when they first signaled). When the actual hike came without hawkish leaning guidance, JPY came under pressure. The hike itself was expected. The guidance was the variable.
Result: USD/JPY pushed back above 157, with yen weakness accelerating.
Why This Matters Now:
We're approaching levels where Japanese authorities have historically intervened. They don’t announce exact levels, but verbal intervention typically comes before actual intervention and there were official comments on December 19th.
The Holiday Factor:
This is where timing matters. Thin liquidity during Christmas/New Year's week amplifies any intervention impact dramatically.
When markets are deep (normal trading volume), intervention has limited lasting effect. The market absorbs the selling pressure and often reverses the intervention within days.
When markets are thin (holiday periods), the same intervention size moves price much further. For reference, the last intervention moved USD/JPY approximately 500 points lower to the 145.00 area.
What Institutions Watch:
Three signals that intervention is coming:
Verbal warnings from Japanese officials - "Closely watching FX moves" or "Excess volatility undesirable" (December 19-Japanese Finance Minister)
USD/JPY approaching 160 - Psychological threshold, though not a hard line (we're at 157 now)
Rapid acceleration - Bank of Japan specifically does not like when the pace of the move accelerates. This adds fuel to the fire and intervention risk increases significantly.
The Framework:
This isn't about predicting intervention. It's about understanding asymmetric risk.
If you're long USD/JPY heading into holiday week:
Upside: Maybe 160 (200-300 pips)
Downside: Intervention spike to 145-150 (700+ pips in thin markets)
Risk/reward: Unfavorable
If you're watching for mean-reversion opportunities:
Bearish momentum divergence on post BOJ high
Thin holiday liquidity (amplifies reversals)
Intervention risk (potential catalyst)
Watching the Setup:
USD/JPY continues grinding higher on low volume. Any escalation in verbal warnings from Japanese officials materially increases intervention risk.
With overbought momentum, bearish divergence, and thin holiday liquidity, the risk/reward becomes asymmetric — the type of setup institutions monitor closely.
This is structural analysis. Not predictions. Not recommendations. Just identifying where risk/reward math becomes heavily one-sided and understanding what that typically means for market behavior.
Week Ahead
Key Events This Week:
Christmas Day
Thin holiday liquidity through New Year
Year-end positioning flows (portfolio rebalancing, window dressing)
No major economic data
Key Levels:
BTC: 78K support test (38.2% Fib) - hold or break determines next leg
USD/JPY: 157 - 160 zone (intervention risk elevated in this zone)
EUR/USD: Bearish daily reversal on December 16th from overbought. Pattern negated over 1.1804
Holiday Week Reminder:
Respect the structure, don't chase moves in thin markets. Whipsaws are common when liquidity is shallow.
BRIEF PERSONAL UPDATE
Quick milestone worth sharing: Our FX mean-reversion strategy goes live with an institutional allocation this week.
The backstory: We launched this model in January 2024 using founder capital, with the objective of establishing a live track record and validating the system in real-world market conditions — not just in backtests.
2024 delivered modest gains during a challenging, low-volatility environment. In 2025, the strategy produced strong double-digit returns, validating the approach across multiple market regimes.
Two years of live performance is typically the threshold institutional investors look for before allocating capital.
Then came the process: Due Diligence Questionnaire covering strategy logic, risk management, operational infrastructure, and team experience. Testing phase monitoring execution and systems. This part of the process took approximately 4 months.
Why mention this? The same systematic frameworks I share in this newsletter every week are what institutional investors just validated through months of due diligence. This is how professional capital evaluates trading strategies.
The allocation doesn't change my approach to markets or this newsletter. Same analysis, same frameworks, same transparency. It just confirms the process works at an institutional level.
CLOSING
Holiday week means lighter markets and likely lighter newsletters. I may skip next Tuesday (Dec 31 - New Year's Eve) and resume January 7, or send a brief year-end recap.
Either way: Enjoy the holidays, respect the thin markets, and don't force trades just because you're bored.
The best opportunities come when you're patient and selective, not when you're chasing action in holiday conditions.
Structure is clear. Let price tell us what's next.
— Mark
Free 10-point trade checklist: meridiancompass.beehiiv.com
For readers who want to see this framework applied in real time, I’ll be opening a private analysis group in Q1 2026 focused on live market structure in FX, crypto, and futures. Same framework-based approach I've used for 30 years - you'll see how I read structure as it develops.
First 25 members: $300/month locked for life. After that, price increases.
Join the waitlist: https://bit.ly/48DbkdJ
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Meridian Compass is brought to you by Mark Schaefer, a quantitative portfolio manager with over 30 years experience developing and trading systematic strategies in global futures and FX at major banks and hedge funds.
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