In light of ECB minutes meeting which was released last week, it is obvious that most traders were disappointed. With Euro bull in charge since the beginning of the year, they were over confident and probably went ahead and bought at the tops. Price action show a decline of prices beginning last week.
From the minutes, we got to know that even though tapering plans were in the pipeline beginning next year, Draghi and other officials recommends this to be done gradually and as cautiously as possible. Accordingly, an accommodative and flexible monetary policy is needed given the contagious effect tapering as on other related macro-economic factors such as inflation. Inflation is actually expected to dip.
Caution was therefore the underlying term here and consequently, hawks were shot down.
From the discussion it also emerged that inflation will likely slowdown as the year close. Decline in energy prices was definitely fuelling disinflationary pressures. As a factor and a metric used by ECB, inflation trends will surely be watched after tapering begins 2018.
Given the neutral interpretation, USD bulls should be driving prices lower in the short to medium term. Keeping it simple, investors can note a break below support trend line after 24.09.2017 candlestick close. There was a consequent retest of the support turned resistance trend line the same week before bear trend was resumed as last week closed.
Immediate support will be at the 200 period MA and price appreciation will likely be impeded by that minor resistance trend line drawn from week ending 03.09.2017 and 24.09.2017 highs.
I will advise USD bulls to initiate short positions and aim for 1.13 especially if price action closed below 1.17 which is minor support level.
Trading will be as follows:
Stop Loss: 1.19
Take Profit: 1.13
There is no major Euro or USD related economic news.
Have a good trading day.