The Citizens suffered a demoralising 2-0 Premier League loss at Tottenham on Wednesday night, with defender Sylvain Distin gifting Spurs the opening goal.
They have lost three of their last four games, the only relief being a goalless draw at Middlesbrough, and Pearce knows he must rally his troops ahead of the Cup tie at the City of Manchester Stadium.
"For some unknown reason we are showing a lack of confidence. Maybe it is the lack of points over Christmas," he said.
"We made some silly individual errors (on Wednesday). If you give sides like Tottenham - or any sides - goals you are going to have a problem.
"But I have had a chat with the boys and told them there is no need for them to be without confidence. That is obviously a problem for me to solve."