EUR/USD retreat back below mid-1.2200s ahead of German ZEW

The greenback held on to its modest recovery gains through the early European session, pushing the EUR/USD pair to fresh session lows near the 1.2230-20 band.

The pair once again failed ahead of the 1.2300 handle and was now being weighed down by a goodish pickup in the US Dollar demand. Despite a weaker tone surrounding the US Treasury bond yields, the greenback gained some positive traction after the US Senators voted to keep the government funded through Feb. 8 and was eventually seen weighing on the major. 

Further downside, however, might continue to be limited on the back the latest German political development, wherein SPD ends a deadlock and votes for coalition talks with Merkel. 

Even from a technical perspective, the pair has been oscillating within a broader trading range as investors seemed to await for the next big fundamental trigger - ECB monetary policy decision, before committing to the next leg of directional move. 

In the meantime, the German ZEW economic sentiment might help traders to grab some short-term trading opportunities amid a relatively thin US economic docket. 

Technical levels to watch

From current levels, the 1.2000 handle, closely followed by the 1.2185 region, might continue to protect the immediate downside, which if broken might prompt some additional weakness towards the 1.2120-15 region. 

On the upside, momentum back above mid-1.2200s might continue to confront fresh supply near the 1.2275-80 region and any subsequent up-move seems more likely to remain capped near the 1.2295-1.2300 region.