EUR/USD erases daily gains, turns flat near 1.0980

• EUR/USD loses traction after climbing above 1.1000 on Wednesday.
• EU Commission proposes €1.85 trillion long-term budget that includes recovery plan.
• US Dollar Index rebounds modestly, steadies above 99.00.

The EUR/USD pair built on Tuesday's rally and climbed to its highest level since early April at 1.1030 on Wednesday. However, the pair struggled to preserve its bullish momentum and erased all of its gains to turn flat on the day near 1.0980.

Earlier in the day, the European Commission announced that the proposed long-term EU budget and the recovery plan will be worth €1.85 trillion and will be used to kick start the economy. The initial market reaction provided a boost to the shared currency during the European trading hours.

Moreover, German Finance Minister Olaf Scholz said that it was very likely that they will get an agreement on the proposed budget. 

Eyes on Fed's Beige Book

In the second half of the day, the greenback started to gather strength against its rivals. Although there was no apparent catalyst behind the USD rebound, souring market sentiment and poor performance of some major currencies such as the GBP and the CAD seems to have helped the buck find demand. 

After dropping to its lowest level in 23 days at 98.72, the US Dollar Index (DXY) advanced beyond and 99.00 and settled here in the American session.

The data from the US on Wednesday showed that the Richmond Fed Manufacturing Index improved to -27 in May from -53 and beat the market expectation of -47. Later in the day, the US Federal Reserve will publish its Beige Book. 

Technical levels to watch for

EUR/USD