EUR/USD erases majority of daily gains, trades below 1.2250

• EUR/USD turned south after rising to 1.2266 on Tuesday.
• US Dollar Index stages a modest recovery during American trading hours.
• Fed's Clarida says Fed could discuss scaling purchases in upcoming meetings.

The EUR/USD pair climbed to its highest level since early January at 1.2266 on Tuesday but lost its bullish momentum in the second half of the day. As of writing, the pair was still up 0.17% on a daily basis at 1.2235.

USD selloff pauses

Earlier in the day, the broad-based selling pressure surrounding the greenback helped EUR/USD build on Monday's gains. Additionally, the data from Germany revealed that the IFO survey's Current Assessment improved to 95.7 in May from 94.2 in April. This reading came in better than the market expectation of 95.5 and helped the shared currency gather strength against its rivals.

During the American trading hours, the USD started to gather strength as Well Street's main indexes turned flat on the day after opening in the positive territory. Additionally, hawkish Fed commentary allowed the US Dollar Index to edge higher.

Federal Reserve's Vice Chairman Richard Clarida noted on Tuesday that April's Consumer Price Index (CPI), which showed annual inflation rose to 4.2%, was "a very unpleasant surprise." 

Clarida further added that the Fed can discuss scaling back purchases in the upcoming meetings; depending on data flow.

Currently, the US Dollar Index is down only 0.05% on a daily basis at 89.79. Meanwhile, the data from the US showed that the Conference Board's Consumer Confidence Index declined modestly to 117.2 in May from 117.5 in April. 

Technical levels to watch for