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  • EUR/USD ekes out small gains as US dollar stalls Tuesday’s bounce.
  • Risk sentiment remains tepid amid resurgent coronavirus risks.
  • EU’s long-term budget and recovery package talks in the spotlight.

EUR/USD consolidates a tepid bounce from two-day lows near 1.1260 ahead of the European open, as the US dollar bounce seems to have fizzled despite the cautious market mood.

The greenback fails to build onto Tuesday’s rebound and trims gains across its main competitors, as markets assess the impact of the fresh regional lockdowns re-imposed in most major global economies. The US dollar index trades modestly flat at 96.93, retreating from 97.03 highs.

The risk sentiment remains fragile, as the optimism over the additional US stimulus talks was overshadowed by the fresh US sanctions threat on China and the continued rise in the coronavirus cases in the US.  

On the EUR-side of the equation, the downbeat German Industrial data combined with dour European Commission’s economic forecasts collaborated with the weakness in the spot.

Further, the EUR traders remain cautious ahead of the much-awaited negotiations on the European Union’s (EU) long-term budget and the recovery package European Council president Charles Michel is expected to present his compromise proposal to capitals later this Wednesday.

Meanwhile, the speech by the European Central Bank (ECB) Vice President Luis De Guindos will be eyed for fresh trading incentives. Also, the sentiment on the European indices and USD dynamics will be closely followed amid incoming virus updates worldwide.

EUR/USD technical levels

“The buyers may take a risk entry while targeting 1.1300 as an immediate gain point. Though, the major attention will be given to the 1.1345/55 area comprising multiple highs since June 16. On the downside, a clear break below 1.1265/60 support confluence will have a 100-bar SMA level of 1.1250 as an extra filter before revisiting the 1.1215/20 region including 200-bar SMA,” explains FXStreet’s Analyst Anil Panchal notes.

EUR/USD additional levels