The shift in the market mood came after the German manufacturing PMI beat earlier and since then, the dollar is finding it tough to stand its ground after having snapped a four-day decline in trading yesterday.
For EUR/USD, this has seen the pair push above its 100-hour MA (red line) as buyers seize back near-term control in a move to 1.1854 from around 1.1804 earlier.
This puts the short-term resistance of around 1.1867-81 into question and in the bigger picture, daily resistance from the 61.8 retracement level of the swing move lower in September @ 1.1859 will be the level to watch to wrap up the week.
On the euro side of the equation, the two-paced 'recovery' in the euro area still presents a lot of question marks surrounding the economic outlook in my view.
If you strip out the robust German manufacturing sector, other countries aren't faring too well and that highlights a broader risk to the region's economic standing.
Adding to that is the virus situation continuing to worsen across the region, especially in the past week, though that should already be accounted for in the PMI survey since the data collected was from 12 to 22 October.
But unless there is reason to believe that tighter restrictions will not be introduced to curb the spread of the virus, economic and business activity are likely to deteriorate further - especially the services sector - in the coming weeks/months.
Hence, that is likely to temper with much of the optimism seen now for the euro.
That said, the dollar side of the equation in EUR/USD is arguably the key driver at the moment with US stimulus talks and the election capturing the market's focus.
As much as there is a strong argument for the euro to not gain based off one "good" data point - which may get worse in the coming months - the dollar's predicament could still help to create a melt up in EUR/USD over the next few weeks.
The election is the main focus and that is coming up in 10 days, but now stimulus hopes are also going to rest on the result (not even sure if there will be a clear cut one) - not to mention whatever comes next depending on whoever wins between Trump and Biden.
As such, arguing to fade the EUR/USD gains today isn't as straightforward as it looks.
The dollar may have snapped a run of losses in trading yesterday but it remains in a vulnerable spot, all things considered. The potential for headline risks later today could also easily shift that sentiment or perhaps solidify it before the weekend.
And then there's also the potential for the market to start pricing in risks or odds of the election outcome, something I believe that investors have been complacent about still.
To sum up, the euro's allure after the PMI beat earlier is questionable but the dollar itself may not be in the right place to challenge or capitalise on that.