EUR/USD downside opening up for a test of key 1.1730 support

• Trump is close to making a decision on Fed chair
• GOP to push through tax reform
• ECB in focus, QE tapering on the cards?

Currently, EUR/USD is trading at 1.1746, down -0.33% on the day, having posted a daily high at 1.1780 and low at 1.1733. The recent downside has tallied up with the noise around Trump making an announcement that he is very close to making a decision on who the next Fed chair will be. 

The choice of the next Fed Chair in addition to speculation regarding the ability of the GOP to push through tax reform this year remain as the key drivers for US yields and the US dollar. "If President Trump chooses to nominate a “hawk”, such as John Taylor or Kevin Warsh, as the next Fed Chair then there could be upside to our prediction of a December 25bp Fed rate hike, followed by two more in 2018," explained the analysts at ING Bank. Also, Taylor is a dove on regulation and thus that also equates to a stronger dollar and more business activity, in line with Trump's preferences for Wall Street.   

Meanwhile, analysts at Rabobank explained that having rallied for three consecutive weeks, EUR net longs have dropped back, though they remain elevated. "Tensions in Catalonia have weighted on the EUR and remain a negative factor. The outcome of the ECB meeting is likely to be a big influence for the next set of data," the analysts added. 

ECB to make key announcements on QE tapering?

In respect to this week's ECB, timings of a QE taper is expected to be revealed. "With a strong cyclical upswing underway and an increasing scarcity of bonds to buy, the ECB looks set to finally embark on its long-awaited tapering programme," argued analysts at ING Bank.

EUR/USD levels

Support on the daily chart's remains near the 1.1730 level while price changes hands below the previous support of the 21 and 10 SMAs cross over at 1.1780/00. The monthly technicals stay bearish. The upside target is for a close above the said SMA's with an objective of 1.1965 on the wide. However, rallies will struggle at the 50-d SMA around 1.1850/80 that caps ahead of the August high at 1.191. Longer term, eyes are on 1.2092 as the September high. The 1.1662 August low would be a completion of a top formation.