EURUSD has been trending lower since breaking below the neckline of a head and shoulders pattern. Price is now moving inside a descending channel pattern and looks ready for a pullback to the resistance.

Applying the Fibonacci retracement tool on the swing high and low shows that the 50% to 61.8% levels are close to the channel resistance. This also coincides with the 200 SMA dynamic inflection point.

The 100 SMA is below the longer-term moving average so the path of least resistance is to the downside, which suggests that the downtrend is likely to continue. Stochastic is still pointing up but already dipping into overbought territory to reflect rally exhaustion.

The US dollar took some hits on setbacks to the tax plan as the Senate version contained several key differences with the one in Congress. This suggests that it would take much longer than initially expected before any of these are implemented, especially since Senate is also proposing a one-year delay for the cuts.

Medium-tier US data has been mixed, with initial jobless claims coming in higher than expected and final wholesale inventories printing a 0.3% increase as expected. US banks are closed for the holiday today but the UoM preliminary consumer sentiment index is still up for release and analysts are expecting to see an increase from 100.7 to 100.8.

The euro drew support from upgraded forecasts by the EU, which supported the idea of tapering next year and possibly an interest rate hike later on. ECB member Coeure also had a testimony with hawkish remarks suggesting that QE cannot go on indefinitely.

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