The US dollar remains king.   It continues to be supported by the divergence in growth and interest rate differentials.  Even though the ECB did not take fresh action this past week, there is little doubt that it will in early 2015.  The aggressive monetary policy in Japan, where the BOJ is expanding its balance sheet by 1.4% (of GDP) a month for as long as the eye can see, also stands in sharp contrast to the US, where the market has largely priced in a hike in Q3 15.    In the coming weeks, it is difficult to envision anything that will undermine this general theme.

There are three main events before the end of the year for global investors.  First, is next week's second TLTRO.  Disappointing participation (less than 125 bln euro take down) would boost confidence that the ECB will take more action early next year.  In turn this would likely weigh on the euro and underpin European bonds and stocks.  

Second, on December 14, Japan goes to the polls.  There is little real challenge to Abe. The DPJ has been poorly organized, and has not been able to tap into the popular anxiety over Abenomics and the controversial political issues, like nuclear power and allowing military involvement to defend other countries.  The LDP and Komeito coalition enjoys a super-majority and polls suggest it will retain it.  

Third,  the FOMC concludes its last meeting of the year on December 17.  The statement could modify or remove the reference to “considerable period” in the forward guidance. This would be seen as a hawkish development, would likely lift the dollar.  The economy has performed well, which the Fed will likely recognize.  Its perspective on oil's impact has already largely been presented by Fischer and Dudley.  The Fed will see the slide in prices are positive for household consumption, and will see the downward pressure on prices as temporary.  

Euro:  Look for another leg down.   The MACDs have lower after approaching levels since in October.  The RSI is turning down from 50.  The next target is near $1.2150-$1.2200, but the $1.20 level, approached in 2012, and $1.1880, the low from 2010 are more significant objectives.    Counter-trend bounces are likely to run out of steam now in the $1.2350-$1.2400 area.  The only note of caution is that the euro is trading below its lower Bollinger Band (~$1.2315), and while new lows were made in the second half of last week, the newest downticks were hard to sustain.