The dollar retreated broadly in the face of improving risk sentiment, with sterling scoring the biggest gains among the majors, but a heavy slate of event risk including U.S. presidential debates and non-farm payrolls lies ahead.
It remained to be seen whether the slide in the U.S. currency was mostly month- and quarter-end position-squaring or a more enduring resumption of asset reflation funded by dollar sales.
For a broad guide to the dollar, traders will be watching stocks for a potential resumption of the uptrend from March in the S&P 500, particularly with a close above the 50-day moving average.
Similarly, the DAX needs to close back above its 55-DMA at 12,908.
EUR/USD held above Friday's September low at 1.16125 on EBS, the STOX600 index posted its biggest gain since June, but the euro stalled ahead of Friday's 1.1685 high.
ECB President Christine Lagarde reaffirmed concern about how the value of the euro impacts inflation nF9N2G600Z.
The broader rebound in risk helped sterling, which has been oversold and showing signs of a bottom by 100- and 200-day moving average supports.
With much of the pound's Brexit, pandemic and negative-rates risk already factored in, sterling was susceptible to a quick squeeze.
GBP/USD ran stops above Friday's 1.2805 high -- by the 38.2% Fibo of the Sept.
16-23 drop and a natural spot for buy stops.
The pound peaked at 1.2930, the 76.4% Fibo of the Sept.
16-23 fall, triggering a pullback to the 10-day moving average, along with comments by EU-UK trade negotiators indicating gaps remained in negotiations nL8N2GP3HI.
That came after further confusing BoE comments regarding negative rates nL8N2GP284 and news of tougher COVID-19 restrictions nL8N2GP0YR.
The euro tumbled to the 50% Fibo of September's rise versus the pound at 0.9028 before rebounding toward the 38.2% Fibo at 0.9078 by the Sept.
17 swing low at 0.9084.
The rebounding dollar index has been unable to close above its downtrend from March's high nL1N2GP0SF and would be threatened by a broader stocks recovery.
The dollar and yen have found something close to technical and macro equilibrium nL1N2GP0ND and look likely to range trade below hurdles by 106 ahead of Friday's U.S. jobs report nL1N2GP0ND.
Much better trading potential is likely in key yen crosses, such as GBP/JPY as it rebounds toward 200-DMA and Fibo resistance at 136.72/86.
Commodity currencies were mixed, with the AUD/USD up 0.5%, but other high beta currencies diverged widely, particularly due to geopolitical concerns in the case of the Turkish lira's losses nL8N2GP346.
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