The US dollar is lower, Treasury yields are falling and US stocks are trading higher as markets digest a major shift in Washington. Democrats have won control of both the House and Senate, setting up divided government for the final two years of President Trump’s term. The new Congress takes office in January.For traders, the immediate question is how much of the initial reaction can hold. Lower yields and falling oil provide a more supportive backdrop for equity buyers, but the election result alone does not determine the next trend. Inflation, employment, earnings and the Fed remain key barometers.A tougher legislative path in WashingtonThe result gives Democrats greater power to challenge the administration through congressional investigations, negotiations over legislation and Senate approval of presidential nominees. Trump retains his veto, leaving both sides facing limits on what they can deliver.From a market perspective, additional tax cuts and major spending packages could face higher hurdles. That could temper expectations for further fiscal stimulus and help explain the focus on lower Treasury yields. However, divided government also creates the potential for confrontations over government funding and the debt ceiling.Technology oversight is another area to watch, including artificial intelligence, data centers and cryptocurrencies. Greater scrutiny would not automatically translate into sweeping legislation. Traders need to distinguish between a change in the political backdrop and policy changes that actually become law.Middle East: Diplomacy continues, but risks remainThe Middle East headlines continue to pull in both directions. Reports of concessions in US-Iran negotiations were followed by Iranian pushback that an agreement was close. As outlined in InvestingLive’s latest oil update, the diplomatic picture remains unsettled.Qatar continues mediation efforts, although a senior Iranian official told Reuters that the two sides remained far apart. US officials also reported limited strikes on Iran’s Qeshm Island, while Trump said he was in no hurry to resume attacks.Separately, Reuters reported that Iran’s Revolutionary Guard claimed four tankers had struck mines near the Strait of Hormuz and that two other vessels had been seized. That remains an attributed Iranian claim, but it underscores the continuing risk to shipping.Crude oil nevertheless failed to hold its earlier advance. The price reached $97.15 before reversing lower and is trading near the session lows around $94.50. Buyers had their shot on the upside. They could not sustain the move, leaving sellers with the stronger hand heading into the North American session.The dollar is lower across the boardThe dollar is weaker against every major currency. Its largest decline is against the New Zealand dollar, while its smallest decline is against the Japanese yen.EURUSD: 1.1261, up 0.61%.GBPUSD: 1.3488, up 0.57%.USDJPY: 158.31, down 0.22%.USDCHF: 0.8155, down 0.62%.USDCAD: 1.3946, down 0.46%.AUDUSD: 0.7011, up 0.65%.NZDUSD: 0.5632, up 0.86%.The broad participation matters. This is a dollar move extending across the major pairs, with the yen participating to a lesser degree.Currency ranges have already exceeded normal daily movementUsing the session highs and lows the current ranges are higher than the 22-day average ranges: suggesting trendier moves (although the path to where we are had it's volatility). The USD is trading near the lows vs the EUR, GBP, CAD, AUD and NZD. The NZD is higher despite a weaker jobs report. EURUSD: 1.1185 to 1.1270 — 85 pips, approximately 120% of its 71-pip average.GBPUSD: 1.3409 to 1.3499 — 90 pips, approximately 127% of its 71-pip average.USDJPY: 157.41 to 158.74 — 133 pips, approximately 162% of its 82-pip average.USDCHF: 0.8128 to 0.8211 — 83 pips, approximately 160% of its 52-pip average.USDCAD: 1.3945 to 1.4014 — 69 pips, approximately 108% of its 64-pip average.AUDUSD: 0.6955 to 0.7022 — 67 pips, approximately 152% of its 44-pip average.NZDUSD: 0.5582 to 0.5645 — 63 pips, approximately 143% of its 44-pip average.All seven pairs have already exceeded their average daily ranges. That does not prevent further extension, but it does mean traders are entering after substantial movement.The practical lesson is to define risk before chasing. An extended range is not a reversal signal. Buyers and sellers still need a technical level to lean against, with risk defined and limited.US stocks trade mixedThe latest indications show the Dow and the S&P higher, but the Nasdaq is trading in volatile fashion above and below unchanged in early NA trading:Dow industrial average: up 884 points.S&P 500: up 68 points.Nasdaq: up 30 points.Treasury yields move lowerUS yields are lower across the curve, with larger declines at the longer maturities:2-year: 4.6038%, down 1.02 basis points.5-year: 4.7161%, down 2.69 basis points.10-year: 4.9167%, down 3.33 basis points.30-year: 5.2922%, down 3.18 basis points.Lower yields can offer support to equities and gold while weighing on the dollar. The next barometer is whether those declines hold as US economic data arrive.European stocks join the advanceEuropean equities are broadly higher:Germany’s DAX: 26,252.38, up 387.75 points or 1.50%.France’s CAC 40: 8,149.51, up 129.19 points or 1.61%.UK’s FTSE 100: 10,800.70, up 162.27 points or 1.53%.Spain’s IBEX 35: 19,363.89, up 556.68 points or 2.96%.Italy’s FTSE MIB: 51,000.75, up 1,058.93 points or 2.12%.European government bond yields are also lower. Germany’s 10-year yield is near 3.318%, France’s near 4.884% and the UK’s near 5.216%.Gold rallies; Bitcoin rebounds from its overnight lowGold is trading near $4,043, up approximately 2.9%, while silver is near $52.10, up about 4.65%. Both are advancing alongside the weaker dollar and lower Treasury yields.Bitcoin fell to an overnight low of $75,666 before recovering to around $78,184 in the supplied snapshot. That is a rebound of $2,518 from the low.The recovery shows that sellers could not sustain the overnight pressure. Buyers now need to build on that rebound. Holding above the overnight low preserves the recovery attempt, but a durable bullish shift still requires progress through technical resistance.North American calendarToday’s calendar brings employment, trade and services-sector data:8:15 AM ET – ADP employment change – Forecast: 69K vs 90K last month8:30 AM ET – US trade balance – Forecast: -$108.0B – Previous: −$105.6 billion.9:45 AM ET – S&P Global final services and composite PMIs. Prelim 57.6 composite and 57.9 Services10:00 AM ET – ISM Services PMI – Forecast: 54.8 – Previous: 54.9.10:30 AM ET – EIA weekly crude oil inventories.The ISM report’s employment and prices components will be particularly useful barometers for growth and inflation. With yields already lower and currencies having completed more than a normal day’s range, a surprise could test whether the overnight moves have further room to extend.In the morning video above, I take a look at the three major currency pairs—EURUSD, USDJPY and GBPUSD—from a technical perspective. For each pair, I outline the bias, the risk-defining levels and the targets that would give either the buyers or sellers more control. This article was written by Greg Michalowski at investinglive.com.