EUR/USD trims losses, re-attempts 1.2250 on German ZEW

• Bulls offered respite on upbeat German ZEW

• Focus shifts to German politics, Eurozone flash PMIs.

The EUR/USD pair extended the bounce from near 1.2235 levels and regained the 1.2250 barrier, following the release of better-than-expected German ZEW economic surveys, which continued to show that the German business morale remains boosted amid upbeat healthy economic growth prospects.  

German Jan ZEW Surveys: A big beat across all indicators

However, the bulls are seen struggling hard to take on the recovery further beyond mid-1.22s, as the US dollar remains broadly bid on the reports of the US government reopen while increased cautiousness ahead of the ECB monetary policy decision due this Thursday also keeps the EUR bulls in a wait-and-see mode.

Moreover, the sentiment around the EUR got hit after the latest ZEW study showed that the ECB is forced to buy more debt from countries such as France, Spain, and Italy due to a shortage of bonds from less-indebted nations like Germany and the Baltic States. 

In the session ahead, the pair is likely to extend its consolidative mode within a 50-pips range, as attention turns towards the coalition negotiations that are set to begin between the SDP and Merkel’s CDU later on Tuesday while Eurozone consumer confidence numbers will be also eyed for fresh incentives.

EUR/USD Technical Levels

Commerzbank’s Analyst, Karen Jones, explains: “EUR/USD’s new high has not been confirmed by the daily RSI and last Tuesday we charted a key day reversal, the market is consolidating very near term. We would allow for a small retracement and beyond this, the market remains on course to challenge the 1.2432 200 month ma. Support should be offered by the 1.2092 September high and the 20-day moving average at 1.2089 – the market will remain immediately bid above here.”