EUR/USD pressured within bullish corrective phase

• EUR/USD is pressured in New York trade as traders weigh the risks associated with higher energy prices.
• A rise in cases “likely” caused by a more transmissible COVID-19 strain is also a concern.
• US president Joe Biden is heading to Brussels for talks with NATO and European leaders.

At 1.005, EUR/USD is down 0.20% during the time of writing and has travelled from a high of 1.1043 to a low of 1.0964 so far. The bears are engaged on the back of another sharp increase in oil and natural gas prices. Additionally, traders are on standby for announcement of fresh sanctions against Russia by the US during the president's trip to Europe.

US president Joe Biden is heading to Brussels for talks with NATO and European leaders and will seek European leaders to reduce their nation's dependency on Russian oil and gas. Biden is expected to announce new sanctions on members of the Russian parliament over Moscow's invasion of Ukraine.

However, the European Union currently is not expected to agree to a ban on Russian oil which would also weigh on the euro, especially now that Russia will insist that "unfriendly countries" pay for Russian natural gas exports only in rubles going forward, according to reports.

Russian President Vladimir Putin said Wednesday that he told Russian government officials a number of Western countries made "illegitimate decisions on the so-called freezing of the Russian assets," which has resulted in a line being crossed "over the reliability of their currencies" and has undermined the trust for those currencies, the Associated Press reported. 

Putin said it "made no sense" to supply Russian goods to the European Union and the United States and receive payment in foreign currencies, including the euro and US dollars. Putin is outlining certain measures to switch to payments for "our natural gas, supplied to so-called unfriendly countries" in Russian rubles but will continue to supply natural gas in accordance with volumes and prices fixed in previously concluded contracts. Russia provides about 40 percent of Europe’s natural gas.

Covid wave swells over Europe

Several European countries have lifted coronavirus restrictions too “brutally”, the World Health Organization (WHO) has warned, as they are witnessing a rise in cases “likely” caused by a more transmissible COVID-19 strain. WHO Europe director Hans Kluge said to be “optimistic, but vigilant” about the pandemic’s development in Europe, adding that cases were on the rise in 18 out of 53 states in the region. 

“The countries where we see a particular increase are the United Kingdom, Ireland, Greece, Cyprus, France, Italy and Germany,” Kluge said. “Those countries are lifting the restrictions brutally from too much to too few,” he added. Epidemiologists have noted that rising cases were partly due to the spread of the highly contagious BA.2 sub-lineage of the Omicron variant which has become dominant in many countries. However, it does not appear to cause more severe disease compared with other strains.

EUR/USD technical analysis

The weekly chart above shows that the price is correcting the weekly bearish impulse and stalling at a 50% mean reversion in resistance territory. The bears are moving in ana bearish close on the week could be significant and continue to weigh on the price outlook towards a downside extension in coming weeks