EUR/USD fades upside momentum around 1.2300 on US dollar retreat

• EUR/USD revisits sub-1.2300 area while trimming early Asian gains.
• US dollar bounce as risk wobbles amid mixed signals, light calendar.
• ECB’s Weidmann sounds cautiously optimistic, US announces additional tariffs on German, French products.
• Partial off in major European bourses, no key data/events on New Year Eve, highlights risk catalysts for fresh moves.

EUR/USD wavers around recently flashed intraday low of 1.2285, at 1.2288 now, during the early Thursday’s trading. The currency major’s latest drop took clues from the US dollar index (DXY) bounce off April 2018 low. While EU-US trade war and fears of the coronavirus (COVID-19) are heard to have triggered the greenback’s corrective recovery, the European Central Bank (ECB) policymaker Jens Weidmann’s comments favor the bulls as we approach the end of 2020.

Having earlier refreshed the lowest levels since April 2018, DXY bounces off 89.51 to currently up 0.04% intraday around 89.64.

Earlier in Asia, California registered the second US case of the covid variant, found in the UK, after Colorado began the disappointment the previous day. The virus strain has a faster transmission rate and is likely to have weighed on the risks off late. Also souring the mood could be the US Trade Representative’s announcement of levying additional tariffs on the German and French products including wine, aircraft parts, etc.

Read: USTR: Additional tariffs target products from France, Germany

Meanwhile, Bundesbank President Weidmann ruled out expectations that the second coronavirus wave to inflict more economic damage than the first wave. However, the policymakers also said that the economic outlook ultimately depends on how covid infections develop after lockdown.

Read: ECB's Weidmann: Economic outlook ultimately depends on how covid infections develop after lockdown

It’s worth mentioning that the passage of the Brexit deal in the parliament and the covid vaccine developments favor risks. Furthermore, hopes that the Joe Biden government will break the US stimulus deadlock also probe the bears.

Against this backdrop, S&P 500 Futures seesaw above 2,700 while markets in Asia-Pacific trades mixed with off in Japan.

Looking forward, US Initial Jobless Claims for the week ended on December 25, expected 833K versus 803K prior, may entertain EUR/USD traders before they join the New Year Eve party.

Technical analysis

Sustained trading above the December 17 top near 1.2270 and 10-day SMA level of 1.2230 keeps the EUR/USD buyers hopeful to keep their eyes on the ascending trend line from December 03, at 1.2370 now.