The dollar index finally resumed its medium-term downtrend from 102.99 last week and hit a low of 90.47. While the daily moving averages are showing signs of accelerating downward movement, the RSI indicates that the DXY is already deeply oversold. There is the prospect of some support at the psychological 90 level, which coincides with the 61.8% forecast from 102.99 to 91.74 from 94.30 to 90.00.
The dollar sell-off was the main topic in the foreign exchange markets last week. With the advent of coronavirus vaccines, the global economy looks set to return to normal next year, despite some cautious comments from central banks.
The yen may look worse than the dollar, but it does still hold above short-term support against most major currencies. The loonie was the strongest, fueled by an upside breakout in oil prices as well as robust employment data. The next strongest positions are followed by the euro and the Swiss franc, while the pound sterling was not too far away. The Australian and New Zealand dollars ended in different directions, while the Australian dollar declined on rising tensions with China.
Investors welcomed the U.S. move towards a $908 billion coronavirus relief package and a comprehensive bill to avoid a government shutdown.
The safe-haven US dollar was largely underpowered, falling above two-year lows along with the Japanese yen reducing risks. The euro soared as the British pound hesitated on ongoing Brexit headlines.
Gold prices rose as crude oil took advantage of the OPEC + deal to begin cutting cuts starting in January by less than expected.
With the Brexit final approaching, the (presumably) daily GBP / USD chart is in the spotlight. The price action on Friday shows that the pair opened near daily lows, rallied 100 pips to a new recent high, and failed to close several pips lower than it opened around 1.3420.
Given a possible Brexit deal, continued positive talk about vaccines, and new incentives, markets could be volatile this week. Some volatility will be welcomed in the market as it gives traders more options.
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