EUR/USD drops towards 1.2000 amid broad US dollar bounce

• EUR/USD stuck in a narrow range ahead of the FOMC decision. 
• Lagarde’s speech also eyed, as the Fed is likely to hold fire.
• Higher DXY and Treasury yields weigh on the spot.

EUR/USD is extending losses towards 1.2000 ahead of the European opening bells, having failed to find acceptance above 1.2050 amid a broad-based US dollar rebound.

The market sentiment remains tepid amid cautious remarks from Fed Chair Powell on the US economy while the continued covid surge in India and Japan continues to dent the risk appetite.

Powell said that the US economy is doing better but is “not out of the woods yet,” in remarks prepared for delivery at a conference of the National Community Reinvestment Coalition.

The greenback gains amid broad risk-aversion and subdued price action in the Treasury yields, in turn, benefiting the main currency pair. At the press time, the 10-year US rates hover around 1.60%, stalling its recovery from near 1.58%.

Meanwhile, mixed German Retail Sales and Final Manufacturing PMIs fail to keep the EUR bulls motivated, as the major remains at the mercy of the US dollar dynamics. The hourly technical setup paints a bearish picture in the near term amid a bearish crossover and RSI.

On Monday, EUR/USD advanced as the greenback faltered alongside the yields on weaker-than-expected US ISM Manufacturing PMI.

Investors now look forward to the US Trade and Factory Orders data for fresh incentives while the sentiment on Wall Street could also influence the major.

EUR/USD technical levels