EUR/USD inches back closer to YTD tops, steady above mid-1.2200s

• EUR/USD edged higher through the mid-European session amid sustained USD selling.
• The prevalent risk-on mood was seen as a key factor weighing on the safe-haven USD.
• Some follow-through buying beyond YTD tops should set the stage for additional gains.

The EUR/USD pair maintained its bid tone through the mid-European session and shot to over one-week tops, around the 1.2260 region in the last hour.

Following the previous day’s modest pullback, the pair managed to regain positive traction on Tuesday and was supported by the emergence of some fresh selling around the US dollar. The prevalent upbeat market mood continued undermining the greenback’s relative safe-haven demand, which, in turn, was seen as a key factor driving the EUR/USD pair higher.

The underlying bullish sentiment got an additional boost after the US House of Representatives voted on Monday to increase stimulus payments to qualified Americans from $600 to $2,000. This was evident from indications of a strong opening in the US equity markets. The measure has been sent for a vote to the Senate, which reconvenes on Tuesday.

The EUR/USD pair has now moved well within the striking distance of YTD tops, around the 1.2270-75 region, touched earlier this December. A sustained move beyond will be seen as a fresh trigger for bullish traders and set the stage for a further near-term appreciating move. That said, relatively thin trading conditions warrant some caution for bulls.

There isn’t any major market-moving economic data due for release from the US on Tuesday. Hence, the US stimulus headlines will play a dominant role in influencing the broader market risk sentiment and the USD price dynamics. This, along with developments surrounding the coronavirus saga, might produce some meaningful trading opportunities around the EUR/USD pair.

Technical levels to watch