EURUSD Long-Term Selloff (Oct 23, 2015)

However, the latest ECB statement triggered a sharp downside break of support, indicating that a long-term selloff is taking place.

The chart pattern is approximately 900-1000 pips in height so the resulting downtrend could last by the same number of pips, possibly taking EURUSD to the previous lows around 1.0500 or much lower. Stochastic and RSI are both pointing down, which means that there's more selling pressure left to push for more declines.

However, the 100 SMA is above the 200 SMA, suggesting that the path of least resistance is still to the upside. A bounce back inside the triangle might be possible in case the breakdown was a false one, but the triangle resistance is still likely to hold as a ceiling.

ECB Governor Draghi said that the central bank is considering adding to their quantitative easing program, depending on how upcoming data turns out. Analysts expect ECB policymakers to announce additional bond purchases and/or lower deposit rates much deeper into the negative territory. Draghi also noted that the euro's appreciation has posed downside risks to growth and inflation, hinting that he'd like to see more declines.

Meanwhile, the US Fed remains on track to hike interest rates soon, although some speculate that they'd wait until next year instead of acting this year as initially anticipated. Data from the US has failed to impress but there are still a few more reports lined up before the next Fed meeting takes place.

Event risks for the euro today include the release of euro zone PMI readings from the top economies, as more signs of a slowdown could push the euro much lower against the dollar. Only the low-tier flash manufacturing PMI is due from the US today.

By Kate Curtis from Trader's Way