EUR/USD holds steady near 1.2250-60 region, just below multi-year tops

• EUR/USD edged lower on Friday amid a modest USD short-covering bounce.
• The shared currency remained well supported by the incoming positive data.
• The German IFO Business Climate rose to 92.1 in December vs 90 expected.

The EUR/USD pair traded with a mild negative bias through the early European session, albeit has managed to recover a major part of its intraday downtick. The pair was last seen trading around the 1.2255-60 region, just a few pips away from 32-month tops set on Thursday.

The pair witnessed some profit-taking on the last trading day of the week and was pressured by a modest US dollar short-covering bounce amid the underlying cautious mood around the equity markets. The US congressional negotiators still haven’t yet agreed on a new coronavirus-relief package and tempered the recent optimism.

Meanwhile, Reuters reported that the US is set to add dozens of Chinese companies, including SMIC, to a trade blacklist. Furthermore, Britain and the European Union struck a downbeat tone about the likelihood of a post-Brexit trade deal. The not so optimistic developments weighed on investors' sentiment and benefitted the safe-haven USD.

On the other hand, the shared currency remained well supported by this week's upbeat Eurozone PMI prints for December. Adding to this, the headline German IFO Business Climate Index came in at 92.1 for December vs 90 expected. The incoming data raised hopes that the bloc's economy is beginning to stabilize and helped limit the downside for the EUR/USD pair.

There isn't any major market-moving US economic data due for release on Friday. Hence, the broader market risk sentiment and US stimulus headlines will play a dominant role in influencing the USD price dynamics. This, in turn, might provide some impetus and assist traders to grab some short-term opportunities.

Technical levels to watch