EUR/USD sees a dead cat bounce above 1.0700 ahead of US Durable Goods

• EUR/USD has witnessed a minute bounce after nosediving to near 1.0700.
• The ECB will move to rate hike measures after concluding the APP.
• The greenback will remain strengthened on a prolonged liquidity shrinking plan.

The EUR/USD pair is displaying a minor bounce after dropping to near the psychological support of 1.0700 in the Asian session. The pair has been plunging from a few trading sessions amid renewed fears of stagflation in the eurozone and a stronger greenback on progressive odds of a jumbo rate hike by the Federal Reserve (Fed) in May.

The insights from the testimony of European Central Bank (ECB) President Christine Lagarde have cleared that a rate hike from the ECB is a little far still now. The ECB official stated that the conclusion of the Asset Purchase Program (APP) will be followed by a rate hike. The APP will conclude in the third quarter of this year, therefore investors should brace for a rate hike by the end of the year. Apart from that, ECB sees a decent slash in the growth forecasts along with soaring inflation this year. The Ukraine crisis has complicated the situation for the ECB and it is unable to follow the footprints of other Western leaders.

Meanwhile, the US dollar index (DXY) has witnessed a minor sell-off from its recent high at 101.86. The dictations from Fed chair Jerome Powell and his colleagues are signaling that the Fed will return to the neutral rates at a quick pace. A rate hike by 50 basis points (bps) in May seems next to confirm and one more jumbo rate hike this year is highly likely. This will continue to strengthen the greenback against the shared currency.