EURUSD broke below the neckline of its long-term head and shoulders pattern, confirming that a downtrend is underway.

The chart pattern is approximately 400-500 pips tall so the resulting selloff could last by the same amount.

The 100 SMA is still sufficiently above the longer-term 200 SMA on the daily time frame, so the path of least resistance is to the upside. However, price is breaking below the dynamic inflection point to signal a pickup in bearish pressure. 

Stochastic was on its way up but turned back down to indicate a return in selling momentum. The oscillator is closing in on the oversold region, though, so a bounce on profit-taking might happen.

The ECB announced its plans to maintain its 60 billion EUR monthly asset purchase program until the end of the year then tapering it down to 30 billion EUR per month from January to September 2018 or beyond if necessary. Bulls seemed unimpressed by this announcement as many expected an earlier or larger reduction.

During the presser, Draghi admitted that the decision was not unanimous and that inflation has not been encouraging. Still he expressed optimism about growth and employment, but euro traders appeared to brush these positive remarks aside.

Meanwhile, the Greenback has gotten a boost from news that the House passed a budget resolution to allow the tax bill to clear Senate without achieving a supermajority. This means that Republican support could be enough to carry the bill through, even as Democrats strongly oppose the proposals.

US advance GDP data for Q3 is due next and hopes are running high after the durable goods orders report suggested a stronger contribution from the business sector for the period. Analysts are expecting to see a 2.6% growth figure, slower than the earlier 3.1% expansion. News on Trump’s Fed Chair pick could also lead to big moves for the dollar.

By Kate Curtis from Trader’s Way