The US dollar traded heavily in the holiday-shortened week. It slipped against all the major currencies. The recovery in commodity prices, the new stimulus Chinese officials suggested, and the relatively high yields conspired to help lift the dollar-bloc currencies. They and the Swedish krona fared best. Sterling, the Swiss franc, and Japanese yen managed to eke out small gains.

The economic calendar is light in the week ahead, and participation will be as well. Nevertheless, it is interesting to look at the technical condition of the dollar as the year draws to a close.

US Dollar Index: It began the year near 90.00, and finished last week near 98.00. There were three dollar phases in 2015. The first was the continuation of the rally that began in mid-2013. It extended through mid-March. The Dollar Index then consolidated lower, though never taking out the 38.2% retracement objective of the advance. A new leg up began in mid-October, and the high for the year was recorded in early December near 100.50. 

However, as the year winds down, a fourth phase appears to be at hand. The correction to the dollar’s last leg up does not appear complete. A break of 97.70 now likely spurs a move to 97.20, the lows from earlier this month. A band of support is seen between 96.80-97.00.

Euro: The correction to the euro’s decline from mid-October (~$1.15 to $1.0525) also does not seem finished. The $1.1040-60 area is important. A break gives potential toward $1.1125 initially, with the downtrend line drawn off the August high (~$1.1715) and the mid-October high (~$1.1500) comes in at the end of the year just below $1.1200.

The $1.08 area proved significant support in the summer, and again now it is important though the euro traded below it for most of November. A convincing violation of it now would confirm the end of the consolidation phase.

Yen: The 0.7% rise in the yen against the dollar over the past week does not capture the technical damage that might have been inflicted. The greenback was pushed through a gradual uptrend line drawn off the late-August China-inspired spike (~JPY116.20) and the mid-October low (~JPY118.20). It was found near JPY120.50 at the end of last week (and rises to ~JPY120.70 at the end of the year). The JPY120.25 area corresponds with a 61.8% retracement of the dollar’s gains off the mid-October low. There is no convincing technical evidence that a low is in place.