The U.S. dollar dropped against its most major opponents in the European session on Tuesday, as investors awaited the first debate between President Donald Trump and Democratic nominee Joe Biden later in the day.

The debate will be held at Case Western Reserve University in Cleveland at 9 pm ET.

Investors speculate that Biden victory will raise the likelihood of further fiscal stimulus to offset the economic damage from the coronavirus pandemic.

Also in focus is ongoing stimulus talks in Washington as Democrats unveiled a new $2.2 trillion bill on Monday night.

House Speaker Nancy Pelosi is set to hold further talks with Treasury Secretary Steven Mnuchin on Tuesday morning.

The economic calendar features the Conference Board's consumer confidence data and S&P/Case-Shiller home price index.

European markets fell, with coronavirus worries and Brexit-related news flow keeping underlying sentiment cautious.

The greenback dipped to 1.2888 against the pound, compared to Monday's closing value of 1.2829. On the downside, 1.31 is likely seen as its next support level.

Data from the Bank of England showed that UK mortgage approvals increased to the highest level in nearly 13 years in August as the housing market gained momentum after the easing of lockdown measures and stamp duty reduction.

The number of mortgages approved for house purchases increased sharply to 84,700 in August from 66,300 in July. This was the highest number since October 2007 and above economists' forecast of 73,000.

The greenback hit a 6-day low of 1.1709 against the euro, down from yesterday's closing quote of 1.1664. Next key support for the greenback is possibly located around the 1.20 region.

Survey data from the European Commission showed that Eurozone economic confidence index reached a six-month high in September driven by waning pessimism in industry, retail trade, construction and services.

The economic confidence index rose to 91.1 in September from 87.5 in August. This was the highest score since March and above economists' forecast of 89.0.

The USD/CHF pair touched 0.9214, its lowest level since September 23. If the greenback declines further, 0.90 is possibly seen as its next support level.

The U.S. currency depreciated to a 4-day low of 1.3352 against the loonie, 6-day lows of 0.6595 against the kiwi and 0.7128 against the aussie from Monday's trading close of 1.3392, 0.6550 and 0.7069, respectively. The greenback is likely to test support around 1.29 against the loonie, 0.68 against the kiwi and 0.74 against the aussie.

In contrast, the greenback approached a 2-week high of 105.71 against the yen, compared to 105.45 hit late New York Monday. The dollar is seen finding resistance around the 108.00 mark.

Data from the Ministry of Internal Affairs and Communications showed that Tokyo overall consumer prices rose 0.2 percent on year in September.

That was shy of expectations for an increase of 0.3 percent, which would have been unchanged from the August reading.

Looking ahead, at 8.00 am ET, Destatis is scheduled to issue Germany's flash consumer prices for September.

In the New York session, Canada industrial product price index for August, as well as U.S. wholesale inventories and advance goods trade balance for the same month, S&P/Case-Shiller home price index for July and consumer confidence index for September are due out.

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