EUR / USD moves away from three-week highs and stabilizes around 1.2100

• EUR / USD took a sharp turn and turned in the second half of the day.
• The US dollar index maintains modest gains above 90.50.
• The euro economy contracted 0.6% in the fourth quarter.

The pair EUR/USD it closed the first day of the week little changed and gained traction during European business hours on Tuesday. However, after hitting its highest level in three weeks at 1.2170, the pair reversed course and turned negative on the day. At time of writing, the pair was down 0.15% on the day at 1.2107.

Hours earlier, data released by Eurostat showed that the euro area economy in the fourth quarter contracted 0.6% on a quarterly basis. This reading was better than the market’s expectation and preliminary estimate of a 0.7% drop. Meanwhile, the ZEW Survey – German Economic Sentiment Index improved to 71.2 in February from 61.8 in January and beat analysts’ estimate of 59.5.

Commenting on the ZEW survey, “Financial market experts are optimistic about the future; they are confident that the German economy will return to growth in the next six months,” said ZEW Chairman Professor Achim Wambach.

DXY rises above 90.50 on rising US Treasury yields.

However, investors largely ignored this data and the USD market valuation continued to affect the movements of the EUR / USD.

During the first half of the day, the dollar remained under strong downward pressure as risk flows continued to dominate financial markets. The US Dollar Index (DXY) fell to its lowest level since Jan 21 at 90.11, but posted an impressive rally early in the US session.

Supported by the strong rally seen in US Treasury yields, the DXY advanced to a daily high of 90.64. Currently, the 10-year US Treasury yield is up nearly 6% and the DXY is still on track to end the day modestly above 90.50.

Technical levels