EUR/USD faces rejection near descending channel resistance amid modest USD bounce

• EUR/USD price pulled back from two-week highs reached this Wednesday.
• The appearance of some dollar purchases was considered a key factor that exerted pressure.
• Repositioning ahead of the ECB on Thursday contributed to the pullback.

The price of EUR/USD saw an intraday reversal from the 1.0275 area, or a two-week high reached earlier this Wednesday, and for now appears to have snapped a three-day winning streak. The pair extended its decline throughout the early North American session and fell to the 1.0175-1.0170 area, or a fresh daily low in the last hour.

Resumption of dollar purchases sparked some selling

The US dollar rallied solidly again and recovered some of this week’s heavy losses to hit its lowest level since July 6, which in turn caused some selling around the EUR/USD pair. Investors seem to remain convinced that the recent rise in US consumer inflation, which has reached a four-decade high, will force the Federal Reserve to make a further interest rate hike later this year. . In addition, a slight deterioration in risk sentiment, reflected in a modest decline in equity markets, helped the safe-haven dollar stem its recent decline from a two-decade high.

ECB uncertainty exerted additional pressure

The shared currency was further pressured by some nervousness ahead of Thursday’s European Central Bank meeting. Market players remain divided on the possibility of a 50 basis point rate hike by the ECB, amid growing recession fears. Recall that a Reuters story on Tuesday suggested the ECB would debate whether to raise interest rates by 25 basis points or 50 basis points to rein in record inflation. However, investors remain concerned that the halting of gas flows from Russia could trigger an energy crisis in the eurozone and limit the ECB’s ability to raise rates further.

Russia to resume gas exports from Nord Stream 1

Russian gas flows through the Nord Stream 1 pipeline will resume promptly on Thursday after completion of scheduled maintenance, but at less than full capacity. Two Russian sources familiar with the export plans told Reuters the gas supply would be less than its full capacity of about 160 million cubic meters (mcm) a day. This comes after the Wall Street Journal reported that the European Commission did not expect the pipeline to resume and may have eased some of the market’s concerns, which should support the euro.

The focus is on the ECB’s decision

The ECB’s monetary policy decision on Thursday will play a key role in driving short-term sentiment surrounding the common currency and will provide a further directional boost to the EUR/USD pair. Given the risk of this key event, traders might refrain from making aggressive bets and prefer to wait on the sidelines. This could help limit any significant declines for the EUR/USD pair, warranting some caution before positioning yourself for any further downside moves.

EUR/USD Price Technical Outlook

EURUSD price has stalled its recent corrective bounce from the lowest level since December 2002 near resistance marked by the upper bound of a short-term descending channel that has been running since the end of May. The mentioned barrier, around the 1.0275-1.0280 region, is closely followed by the 1.0300 mark, which if breached would be seen as a new trigger for the bulls. The pair could then pick up momentum and try to recapture the 1.0400 round figure.

On the other hand, any further decline could find support at the 1.0150 area. Follow-up selling would negate any short-term positive bias and make the pair vulnerable to breaking below the 1.0100 mark. The subsequent drop would expose the peg market and the year’s low around the 0.9950 area.