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  • EUR/USD reverses Tuesday’s pullback from weekly top, battles intraday high of late.
  • Hopes of further stimulus, US-China trade headlines weigh on DXY amid a quiet session.
  • German Retail Sales could pause three-month recovery, ECB’s Lagarde may keep rejecting reflation fears.
  • Tapering, inflation and covid updates may entertain traders ahead of Friday’s US NFP.

EUR/USD stays mildly bid above 1.2200, up 0.10% intraday around 1.2225, heading into Wednesday’s European session. The major currency pair refreshed its weekly high on Tuesday, just to post the highest daily losses in over a week, amid US dollar moves and mixed catalysts at home. The quote’s latest moves could be traced to the sluggish session in Asia as well as the US dollar’s attempt to keep the previous day’s rebound.

Although the Eurozone CPI crossed the ECB’s forecast of “around but below 2.0%”, mixed prints of the index component defies the reflation risk for ECB Governor Christine Lagarde during today’s speech. Even so, the policymaker may not ignore further strength of the key catalysts as Unemployment Rate also dropped in the latest reading. In the case of the US data, ISM Manufacturing PMI came in strong but the details couldn’t propel the reflation talks and help the Fed policymakers to reject tapering concerns.

Additionally, German Retail Sales bears the downbeat forecast to snap a three-month uptrend with -2.0% MoM print versus +7.7% prior. The same could offer an additional reason to defend the 1.2200 level by the EUR/USD buyers.

On the other hand, recent comments from the Fed policymakers have been mixed but positive chatters over the Sino-American trade deal can help the US dollar to extend the latest recovery moves. Also positive for the sentiment is the news suggesting a $50.00 billion investment in developing economies by the International Monetary Fund (IMF), the World Health Organization (WHO) and other institutions.

It’s worth noting that the pre-NFP caution and uncertainty over the Fed’s next move, as well as US President Joe Biden’s stimulus, test the market optimism amid a light calendar day.

Against this backdrop, market sentiment dwindles and fails to provide any clear direction to the major pair. However, the US dollar’s efforts to keep the previous day’s recovery moves keep testing EUR/USD buyers around 1.2230.

Moving on, Fedspeak, reflation and tapering talks could help direct the US Treasury yields and the US dollar ahead of Friday’s key jobs report.

Technical analysis

A looming cross-over of the 50-day SMA (DMA) to the 100-DMA, coupled with strong support from March 31 around 1.2200, backs the pair’s recovery moves targeting the weekly resistance line around 1.2250.