It was another difficult week for the greenback, which moved lower against all the major currencies.  The Scandis led it, helped by risk-on appetites and Norway's central bank penciling in its first rate hike around mid-2022.  The hope of a UK-EU deal appears to have spurred short-covering, which lifted sterling to new 2.5-year highs, though pulled back a bit ahead of the weekend.  

Germany led the major equity markets higher as the DAX advanced by nearly 4%, which turned it positive for the year.  However, the global recovery is being led in Asia, and the MSCI Asia Pacific Index rose for the seventh consecutive week.  In the US, the Russell 2000 outperformed the S&P and Nasdaq.  Benchmark yields finished higher on the week, and this seemed like some profit-taking ahead of year-end more than a fundamentally-driven move.  We note that several countries, including Germany, France, Sweden, and Portugal, saw a greater backing up than the US. 

At pixel time, we still await word from the UK-EU negotiators and the US Congress about their stimulus efforts and boost the federal government's spending authorization.  With the pandemic out of control and what appears to be the large cyber attack on the US, it seems to be a particularly poor time for a government shutdown, let alone a presidential veto of a defense bill over the liability of social media companies for user content and dropping the use of Confederate generals' names for American bases. 

Dollar Index:   The 92.00-94.00 trading range that framed the Dollar Index from around mid-July ended quietly in late November.  It pushed below 90.00 last week for the first time since April 2018.  A quiet pre-weekend session was recorded inside the previous day's range.  The technical indicators are mixed, and the Slow Stochastic did not fall to new lows with the Dollar Index.  The 90.20-area offers the initial cap, and it was approached ahead of the weekend.  Stronger resistance is in the 90.60-90.80 band. On the downside, the next interesting chart point is seen around 89.00.  (UDN)

Euro:  The euro broke out of its $1.16-$1.20 range in late November, ahead of the ECB meeting, which surprised us.  It moved into a $1.2060-$1.2180 range before taking another leg up last week to almost $1.2280.  The MACD and Slow Stochastic are overextended but still moving higher, confirming the new highs in spot.  While initial support now is seen around $1.2200, the near-term trendline is near $1.2165, and the trendline off the election-eve low near $1.06 begins next week by the 20-day moving average (~$1.2075).  The upper Bollinger Band is around $1.2310.  (FXE)

Japanese Yen:  The dollar traded below JPY103 last week for the first time since March's tumult. Japanese officials were quiet, unlike when the dollar broke below JPY104 last month.  The selling exhausted itself just below JPY102.90, and the greenback held above JPY103 ahead of the weekend.  As a heuristic device, we often think of the dollar-yen as range-bound currency, and when it looks like it is trending, it is moving to a different range.  In that context, it does appear that the dollar is moving to a new and lower trading range. This means that resistance is likely ahead of JPY104.00.  The momentum indicators are still headed lower, but caution is in order.  The lower Bollinger Band is near JPY103.30.  The initial push below JPY104.00 was rejected, and the bounce provided the selling opportunity.  (FXY)

British Pound:  Even with the pullback ahead of the weekend, sterling had its best week since the end of August with a nearly 2% gain. That is almost twice the euro gain and suggests it was something more than a weak US dollar environment that helped sterling.  It poked above $1.36 for the first time since May 2018 and closed above its upper Bollinger Band before succumbing to selling pressure before the weekend.  A deal could see sterling spike higher, and some talk suggests about $1.38-$1.40, while an end of talks without an agreement could see it slump with $1.28-$1.30 often. (FXB) 

Canadian Dollar: The US dollar's downside momentum faded last week, even though a marginal new  20-month low was set on December 15, a little below CAD1.2680.  It tested the down trendline drawn off the early November high ahead of the weekend, in thin turnover, near CAD1.28, and amid falling equities.  The MACD appears to be curling higher, and the Slow Stochastic has been edging higher since earlier this month.  The initial band of resistance extends toward CAD1.2830, but there is scope for CAD1.2900-CAD1.2930 without changing the favorable outlook for anything but the near-term.  That said, some observers see the Canadian dollar as often a leading currency in the broader movement of the greenback. (FXC) 

Australian Dollar:  With last week's 1.1% gain, the Australian dollar has appreciated seven consecutive weeks.  It has risen from about $0.7030 at the end of October to $0.7640 last week before consolidating ahead of the weekend.  Of course, the momentum indicators are extended, but they have not turned down.  Initial support is seen near $0.7580 but provided it holds above $0.7500, it is a flattish consolidation.  A cabinet shuffle seeks to find a re-start button with Beijing though so far, the impact of China's trade actions appears marginal.  Canberra may find that only a policy change will appease its largest trading partner.  The Australian dollar has appreciated by about 8.5% this year.  A more modest appreciation next year lifts it to $0.8000, which seems like a reasonable target. (FXA) 

Mexican Peso:  The dollar began the week near four-week highs around MXN20.26 before posting a key reversal and settling below the previous session's low on December 15 and bottomed near a little below MXN19.74 two days later.  By bouncing back above MXN20.00, the dollar has recorded a higher lower, unable to take out the earlier December low near MXN19.70.  It also reinforces the largest sense of consolidation.   A move above MXN20.25 would likely signal a longer corrective phase that could see the dollar return to MXN20.50.  The Slow Stochastics appear to have rolled over while the MACD has been trending higher since late November.  

Chinese Yuan:  The dollar has also been moving broadly sideways against the Chinese yuan this month.  The two-week affair has not seen the dollar trade below CNY6.52 or above CNY6.56.  Against the offshore yuan, the dollar tested the CNH6.50 level, which held. Some suggest that real or imaginary official signals helped.  A key level to watch on the upside is around CNH6.5420, the 20-day moving average, which it has not traded above since early November.  The 20-day moving against the onshore yuan is near CNY6.5550.  The dollar has not closed above it since September. (CYB) 

Gold:  The precious metal was tarnished in November.  It fell by a little more than $160 an ounce in the last three weeks of the month.  It has now rallied three weeks in a row, clawing back a little less than $95. It approached $1900 for the first time since mid-November before consolidating of the weekend. However, it was not able to close above the (61.8%) retracement objective of the losses since the November 9 vaccine announcement.  The MACD is trending higher, and the Slow Stochastic has turned higher from elevated levels.  A push back toward $1865 may be seen before a convincing break of $1900. (GLD) 

Oil:  Light sweet crude for February delivery rose 5.2% last week to extend its rally for the seventh consecutive week.  At the end of October, it settled just below $36.60.  Before the weekend, it was approaching $49.50, its highest level in 10 months. It was around $55.50 a year ago.  The MACD and Slow Stochastics are stretched, but no sign of turning.  It closed just inside its upper Bollinger Band ($49.20), near session highs. The $50-level may be of psychological importance, but chart resistance is seen nearer $51.30. (OIL)  

US Rates:  The US 10-year yield edged up last week, rising in four sessions in a row to end the week.  The actual rise in yield was about five basis points to 0.95%.  The 10-year generic yield traded between about 0.88% and 0.98% in the last couple of weeks.  By recognizing that virus impact will weigh on Q1 while revising higher the (median ) growth forecast for 2021 and 2022, the Fed seems to suggest the bar is high yield curve control, accelerating its purchases, or shifting the composition.   If the fear of Fed action was the main cap on the yields, then a push above 1% should be expected.  The price action of the March futures note and momentum studies favor a move lower (higher yields). (SPTL) 

S&P 500:  The pre-weekend price action was a yellow flag.  The benchmark rose to a new record high before reversing and settling below the previous session's low, constituting a key reversal.  It still managed to close higher on the week (0.70%).  The next targets are the 20-day moving average near 3660 and the low from December 11, which is also the month's low so far, around 3633.  The MACD has been trending lower since December 9, the last time a key downside reversal was posted.  It fell a little more than 2% then from high to low.  The Russell 2000 rose by nearly 3.5% last week, while the Nasdaq gained almost 2.5%, the S&P 0.75%, and the Dow Industrials were nearly flat. (SPX, SPY)