EUR/USD: Bearish hammer on D1 ahead of ECB minutes

• EUR/USD created a hammer candle on Wednesday, warning of an impending bearish move.  
• Waning trade optimism will likely keep the EUR on the defensive.  
• The ECB minutes are likely to show growing opposition to the latest stimulus package.  

EUR/USD is looking heavy ahead of the minutes of the European Central Bank’s (ECB) October policy meeting, which are expected to show the members stand divided on which course to take.

The currency pair carved out a bearish hammer candle on Wednesday, indicating the bounce from recent lows below 1.10 has run out of steam and warning of an impending downside move.

A bearish reversal, however, would be confirmed if the pair closes below the hammer candle’s low of 1.1053 on Thursday.

On the other hand, a close above 1.1081 would invalidate the bearish hammer and signal a resumption of the recovery rally.

Waning trade optimism

Markets turned risk-averse in Asia, courtesy of reports stating that phase one” U.S.-China trade deal could slip into next year. Traders are also worried that renewed political tensions between the US and China could complicate matters on the trade front.

Note that China has warned of retaliation to the US Senate’s move to pass legislation to safeguard human rights in Hong Kong.

The waning trade optimism may not bode well for the common currency. After all, the German economy, Eurozone’smanufacturing powerhouse, took a big hit over the last 12 months, courtesy of the Sino-US trade tensions.

A bearish close, therefore, looks likely.

Focus on ECB minutes

The common currency may pick up a bid if the minutes show growing opposition to the massive easing package announced by the former President Draghi in September.

Any spike, however, is likely to be short-lived, courtesy of trade tensions. Also, the ECB is unlikely to normalize the policy anytime soon, despite the growing rift among the board members.

Technical levels