EURUSD price faces rejection near descending channel resistance amid modest USD bounce

• EURUSD price retreated from a two-week high touched earlier this Wednesday.
• The emergence of some USD buying was seen as a key factor exerting pressure.
• Some repositioning ahead of the ECB on Thursday contributed to the pullback.

EURUSD price witnessed an intraday turnaround from the 1.0275 area, or a two-week high touched earlier this Wednesday and for now, seems to have snapped a three-day winning streak. The pair extended its descent through the early North American session and dropped to the 1.0175-1.0170 area, or a fresh daily low in the last hour.

Renewed USD buying prompted some selling

The US dollar made a solid comeback and recovered a part of this week's heavy losses to its lowest level since July 6, which, in turn, prompted some selling around the EURUSD pair. Investors still seem convinced that the recent surge in US consumer inflation to a four-decade high would force the Fed to deliver a larger rate hike later this year. Adding to this, a slight deterioration in the risk sentiment - as depicted by a modest fall in the equity markets - assisted the safe-haven USD to stall its recent pullback from a two-decade high.

ECB uncertainty exerted additional pressure

The shared currency was further pressured by some nervousness going into the European Central Bank meeting on Thursday. Market players remain divided over the possibility of a 50 bps rate hike by the ECB amid growing recession fears. It is worth recalling that a Reuters story on Tuesday suggested that the ECB will discuss whether to raise interest rates by 25 bps or 50 bps to control record-high inflation. Investors, however, remain concerned that a halt to gas flows from Russia could trigger an energy crisis in the Eurozone and curtail the ECB's ability to raise rates further.

Russia to restart gas exports from Nord Stream 1

Russian gas flows via the Nord Stream 1 pipeline reportedly will resume on time on Thursday after the completion of scheduled maintenance but at lower than its full capacity. 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. This comes after the Wall Street Journal reported that the European Commission did not expect the pipeline to restart and might have eased some of the market concerns, which should lend support to the euro.

Focus remains on ECB decision

The ECB monetary policy decision on Thursday will play a key role in driving the near-term sentiment surrounding the common currency and provide a fresh directional impetus to the EUR/USD pair. Heading into the key event risk, traders might refrain from placing aggressive bets and prefer to wait on the sidelines. This could further help limit any meaningful downfall for the EUR/USD pair, warranting some caution before positioning for any further depreciating move.

EURUSD price technical outlook

EURUSD price stalled its recent corrective bounce from the lowest level since December 2002 near a resistance marked by the top boundary of a short-term descending channel extending from late May. The mentioned barrier, around the 1.0275-1.0280 region, is closely followed by the 1.0300 round-figure mark, which if cleared would be seen as a fresh trigger for bulls. The pair might then accelerate the momentum and aim to reclaim the 1.0400 round figure.

On the flip side, any subsequent downfall is likely to find some support near the 1.0150 area. Some follow-through selling would negate any near-term positive bias and make the pair vulnerable to breaking below the 1.0100 mark. The subsequent downfall would expose the parity market and the YTD low, around the 0.9950 region.

EURUSD price: Key trading levels [Video]