Step 1: Understanding the given conditions
The given lines \( x+y = 2 \) and \( x-y = 2 \) are perpendicular, forming a square with the given circle.
Step 2: Finding the required circle equation
Using the standard form of a circle and solving for the appropriate radius satisfying the tangency conditions, we get:
\[
(x - \sqrt{2})^2 + y^2 = 3 - 2\sqrt{2}.
\]