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  • EUR/USD keeps bounce off eight-day low but struggles to hold 1.2100.
  • Fed’s Powell tried to play nice with cautious optimism despite conveying economic uncertainty.
  • Bears haven’t forgot ECB policymakers’ dovish comments, EU-UK tussle over vaccine.
  • European Consumer Confidence, German inflation and US Jobless Claims can also entertain traders.

EUR/USD retraces from the monthly low while taking rounds to 1.2110-05 amid the initial Asian session on Thursday. The currency major dropped to the lowest since January 18 the previous day as dovish comments from Dutch Governor and the Fed’s downbeat appearance weighed on the risks, favoring the US dollar. Although Fed Chairman Jerome Powell tried to placate the bears, the EUR/USD traders are waiting for the first reading of the US Q4 GDP for further direction.

ECB Governing Council Member and Dutch Governor Klass Knot struck bold comments suggesting the bloc’s central bank’s readiness to go ahead with further negative rates if needed. The news weighed down the regional currency across the board amid downbeat economics and worsening virus conditions at home.

On the other hand, the US Federal Reserve also marked spoke dovish while keeping the benchmark Fed rate and asset purchases unchanged, as expected. However, the central bank’s statement conveying the moderate pace of US economic activity and employment exerted an additional burden on the risks. While trying to keep the traders hopeful, Fed Chair Powell cited hopes of economic recovery despite initially conveying economic uncertainty and showing readiness to act.

Read: Powell speech: Jury is out on whether there will be economic scarring

It should be noted that tensions between the European Union (EU) and the UK grow recently over AstraZeneca’s inability to match the vaccine supply commitment. In the latest development, the bloc demands UK covid vaccines from the drugmaker to make up the shortfall, per Financial Times.

Amid these plays, markets in Europe and the US turned red on Wednesday while the US dollar index (DXY) benefited from the risk-off mood and poked the monthly high, marked on January 18.

Looking forward, US preliminary readings of the Q4 GDP, expected 3.9% versus 33.4% prior, will be the key to watch as EUR/USD traders would like to confirm the Fed’s dovish appearance. Ahead of it, European Consumer Confidence for January, likely to remain unchanged at -15.5, as well as Germany’s Harmonized Index of Consumer Prices for January, anticipated to recover from -0.7% YoY to +0.5%, can also entertain the pair traders.

Technical analysis

50-day EMA restricts immediate downside around 1.2100 but 1.2050 will be the key support comprising lows marked since December 09. As a result, a corrective pullback can eye for last Friday’s top near 1.2190.