EURUSD price shifted into a correction mode after failing to surpass Tuesday’s high at 1.0269 on Wednesday. The availability of barricades around a fresh three-week high activated selling pressure and dragged the asset to near 1.0156. On a broader note, the asset is scaling higher with sheer momentum. The pair has displayed signs of rebound and is expected to extend its recovery above 1.0200.

Meanwhile, the US dollar index (DXY) picked bids around 106.39 and displayed a pullback move above 107.00. A decent pullback in the DXY was expected by the market participants as a vertical downside move forced profit-booking at lower levels. The DXY is attempting to establish above 107.00 as lower selling pressure while testing Tuesday’s low around 106.40 has underpinned a short-term bullish reversal for now.

Also Read: EUR/USD Forecast: EUR corrects higher ahead of critical ECB decision

ECB President Christine Lagarde to announce a rate hike today

EURUSD price faces the heat of lower Consumer Confidence

EURUSD price witnessed a decent corrective move after the release of the lower Consumer Confidence. The consumer sentiment data landed at -27, worsen than the expectations of -24.9 and the prior release of -23.8. A slippage in the confidence of consumers in the economy results in an economic downturn, henceforth more losses for eurozone. It is worth noting that the US economy also reported Consumer Confidence last week. The data landed minutely higher at 51.1 vs. 50 reported earlier.

Political instability in Italy put pressure on the shared currency

Ongoing political turmoil in Italy after Prime Minister Mario Draghi informed his resignation despite winning a confidence motion in the upper house Senate on Wednesday has put certain pressure on the EURUSD price. The political instability has soured market sentiment as the economy is already facing the heat of soaring price pressures and over that a political instability raises concerns over the growth prospects.

Obscurity over Nord Stream 1 still persist

EURUSD price will remain under pressure as obscurity over the gas supply from Nord Stream 1 to Europe still persist. Earlier, two Russian sources familiar with the export plans told Reuters that the gas supply would be at less than its full capacity of some 160 million cubic metres (mcm) per day. Although the European Commission was not expecting that the pipeline will restart. Now comments from Russian President Vladimir Putin said on Wednesday that they are yet to see in which condition the equipment for Nord Stream 1 will be after returning from maintenance have created obscurity over the gas supply in eurozone.

EURUSD price to remain on sidelines ahead of ECB policy

The European Central Bank (ECB) is set to paddle up its interest rates for the first time in 11 years as price pressures are demanding containment. It would be worth watching whether the ECB will initially test the waters by hiking interest rates by 25 basis points (bps) or will choose the new normal of 50 bps. The announcement will definitely cushion the shared currency bulls against the DXY as the event will trim the ECB-Federal Reserve (Fed) policy divergence.

EURUSD technical analysis

EURUSD price has attempted a rebound on a Positive Divergence formation, which indicates a resumption of an uptrend after a corrective move. A Positive Divergence has been recorded after the asset made a higher low at around 1.2907 while the momentum oscillator Relative Strength Index (RSI) (14) made a lower low. This dictates an oversold situation in an uptrend which is considered a bargain buy for the market participants.

The major is auctioning between the 50- and 200-period Exponential Moving Averages (EMAs) at 1.0195 and 1.0160 respectively, which signals a minor consolidation ahead.

EURUSD hourly chart

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