The euro fell to a five-week low against the dollar on Monday, and traded in a range below its 100-day moving average for the first time since May, as markets braced for potential U.S. election uncertainty.
Stellar U.S. manufacturing data also helped, with an October ISM reading of 59.3 nN9N2E801P outshining the euro zone's solid 54.8 IHS Markit PMI nL8N2HO232, while Europe's COVID-19 curbs nL4N2HO2E8 added to the economic contrast with the U.S. not headed toward lockdown despite disquieting pandemic data nL1N2HN0CY.
Last week's stocks drubbing and safe-haven dollar and yen buying factored in a lot of potential election uncertainty, but it will take clarity on Tuesday's presidential and Senate races to rekindle financial risk-taking and reverse bidding in the U.S. currency.
Though the S&P 500's ability to hold above September's lows may foster some confidence, providing a ray of hope for risk-sensitive currencies, the potential for a contested election could outweigh that sentiment.
For EUR/USD, a breakdown below September's lows would create risk of traders accelerating the process of unwinding historically large net-long speculative positions.
The bulk of those positions were accumulated when EUR/USD was above September's lows.
If stocks fail to hold Monday's rebound after the election, EUR/USD may head for its 200-day moving average, last at 1.1657.
There's also Fibo and big-figure support near 1.15 nL1N2HO1FL.
GBP/USD slipped on news of a one-month UK pandemic lockdown nL1N2HO49KnL1N2HO0U9 and mediocre PMI data nL8N2HL4KV, breaking below 100-day moving average support at 1.2878 and trading wholly below the daily cloud.
Brexit headlines sounded a familiar refrain about hard work in EU-UK trade talks to close "significant gaps" on the most difficult issues nS8N2GY097 as the days until the year-end deadline dwindle nL1N2HO1BI.
USD/JPY extended its recovery from last week's failed attempt to break below September's 104 nadir, with ISM offering support.
However, USD/JPY must clear the kijun line at 105.07 to signal further gains and a likely test of the 55-day moving average by 105.50 and the downtrend line from July highs that will be at 105.55 on Wednesday nL1N2HO1K0.
AUD/USD dipped to its lowest since July but rebounded with stocks and was helped by strong China PMI data, with an RBA rate cut on Tuesday well anticipated.
AUD/USD remains positively correlated to S&Ps and other global risk gauges, making the U.S. election crucial.
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