The dollar paused for breath on Tuesday as investors weighed the news of COVID-19 vaccine progress nL1N2HV0TR that ignited the previous session's rally against the likelihood of a tough pandemic winter nL1N2HW090 before mass inoculations are possible.
Investors ceased dumping negatively yielding currencies such as the yen, Swiss franc and euro by U.S. afternoon trade, leaving major currencies little changed on the day -- except for sterling's relentless advance toward September's peak nL1N2HW1LG.
EUR/USD recovered back near flat, but only after falling below Monday and Friday's lows following weaker-than-expected November ZEW data nL8N2HW3DA.
EUR/USD traded below Monday and Friday's lows in line with the follow-on pullback in the S&P 500 from Monday's spike to record highs and after weaker-than-expected November ZEW reports nS8N2HO03M.
The limited ability to break out above 1.19 on Monday did not bode well for EUR/USD, while the potential for spec longs to use rallies for profit-taking and the potential for vaccine developments to lead the Fed to reconsider aggressive emergency easing measures next year were also impediments nL1N2HW1LH.
The 55-day moving average at 1.1783 and Tuesday's massive 1.18 option expiries cushioned the fall to 1.1780.
The 50% Fibo of the 1.1602-to-1.1920 surge from last week's low to Monday's peak at 1.1761 looks like pivotal support.
Sterling stood out for a second day as a top performer, gaining against the dollar, euro and yen, helped by the rise in risk appetite in recent sessions nL1N2HW23E and official comments about Brexit negotiations making progress nS8N2HE001.
USD/JPY fell to a session low of 104.82 on EBS but stopped before hitting the 21-day moving average and then bounced back up above the 55-day moving average, downtrend line from July and the cloud top, the latter at 105.525 and a potentially pivotal level on closes.
But the primary technical protectors of the downtrend from March's pandemic peak are just below 106 and at October's 106.11 high nL1N2HW1H5.
Clearing those major hurdles may fall to the calculus of near- to medium-term pandemic risks, compared to the longer-term bullish view effective vaccines suggest.
The Australian dollar and other high-beta currencies also consolidated, perhaps in pauses that will refresh their uptrends nL1N2HW296.
The containment of the pandemic in Australia as the weather warms there, China's exceptional growth and higher potential demand for commodities when vaccines tame to global pandemic are supports.
The flat daily cloud top at 0.7209 looks like decent support if this month's aggressive uptrend needs further retracement.
For more click on FXBUZ