EUR/USD recovers early lost ground to one-week low, jumps back above 1.1300 mark

The EUR/USD pair recovered its intraday losses to a one-week low and jumped to a fresh daily high, around the 1.1320 region during the early North American session.

The pair extended this week's retracement slide from the vicinity of the 1.1350-60 resistance zone and edged lower through the early part of the trading on Wednesday. This also marked the third day of a negative move in the previous four sessions and was sponsored by some follow-through US dollar buying interest.

Despite the optimism over signs that the Omicron variant might be less severe than feared, worries about the economic impact of the continuous surge in new COVID-19 cases weighed on investors' sentiment. This was evident from the cautious mood around the equity markets, which drove some haven flows towards the buck.

Apart from this, a goodish pickup in the US Treasury bond yields further underpinned the greenback and exerted some pressure on the EUR/USD pair. In fact, the yield on the benchmark 10-year US government bond shot back above the 1.50% threshold amid the Fed's hawkish outlook, indicating at least three rate hikes next year.

The USD, however, struggled to capitalize on the positive move and has now surrendered its intraday gains to a four-day high. This, in turn, assisted the EUR/USD pair to attract some buying near the 1.1275 region, though any meaningful upside still seems elusive amid thin end-of-year liquidity conditions.

Meanwhile, data released from the US showed that the goods trade deficit widened to $97.78 billion in November from $83.2 billion in the previous month. Separately, the Preliminary report indicated that US Wholesale Inventories rose 1.2% MoM in November, though did little to provide any meaningful impetus to the EUR/USD pair.

Wednesday's US economic docket also features the release of Pending Home Sales data. This, along with the US bond yields and the broader market risk sentiment, might influence the USD and produce some trading opportunities around the EUR/USD pair.

Technical levels to watch