EUR/USD flirts with over two-week high, around 1.0775-80 region on weaker USD

• EUR/USD attracts buyers for the second successive day in the wake of fresh USD selling.
• The Fed rate hike uncertainty drags the US bond yields lower and weighs on the Greenback.
• The prospects for further tightening by the ECB underpin the Euro and remain supportive.
• Traders now look to the German ZEW survey for some impetus ahead of the US CPI report.

The EUR/USD pair regains positive traction following the previous day's late pullback from a two-and-half-week top and builds on its steady intraday ascent through the Asian session on Tuesday. Spot prices, however, remain below the 100-day Simple Moving Average (SMA) resistance and currently trade around the 1.0780 region, up over 0.20% for the day.

The US Dollar (USD) comes under some renewed selling pressure and drops to its lowest level since May 22, which, in turn, is seen as a key factor pushing the EUR/USD pair higher for the second straight day. Dovish rhetoric by a slew of influential Federal Reserve (Fed) officials boosted market expectations for an imminent pause in the US central bank's year-long rate-hiking cycle. This, along with a fresh leg down in the US Treasury bond yields, continues to exert some downward pressure on the Greenback.

The shared currency, on the other hand, draws support from rising bets for a further policy tightening by the European Central Bank (ECB) and is seen as another factor acting as a tailwind for the EUR/USD pair. In fact, ECB President Christine Lagarde indicated earlier last week that additional interest rate rises were likely as, so far, there was no clear evidence that underlying inflation has peaked. This, in turn, suggests that the ECB  is not done raising rates despite a fall in consumer inflation and favours bullish traders.

Investors, however, might refrain from placing aggressive bets and prefer to wait on the sidelines ahead of this week's key central bank event risks. The Fed is scheduled to announce the highly-anticipated monetary policy decision on Wednesday, which will be followed by the ECB meeting on Thursday. In the meantime, traders on Tuesday will take cues from the release of the German ZEW Economic Sentiment and the latest US consumer inflation figures to grab short-term opportunities around the EUR/USD pair.

Technical levels to watch