EURAUD might be in for a reversal from its long-term downtrend, as the pair is completing an inverted head and shoulders pattern on its daily time frame.

Price is already testing the neckline around the 1.5000 major psychological mark, and a break above it could set off a climb that’s around 500 pips. However, technical indicators appear to be reflecting bearish pressure.

The 100 SMA is below the 200 SMA to signal that the path of least resistance is to the downside or that the selloff is more likely to gain traction than to reverse. The 100 SMA is also in line with the neckline to add to its strength as a ceiling.

Stochastic has some room to climb, so buyers might still have some energy left for a bullish breakout. However, the oscillator is also closing in on the overbought region to signal exhaustion among buyers soon. Turning lower might indicate that sellers are returning and that EURAUD could slump back to nearby support levels.

RSI also has some ground to cover before reaching the overbought level, but the oscillator seems to be moving sideways to reflect consolidation.

There are no major reports due from Australia for the rest of the week, so EURAUD might take cues from eurozone data. In particular, PMI readings are lined up from the top nations like Germany and France.

Both countries are expected to post slight declines in their manufacturing and services PMI figures, although the readings are still expected to reflect expansion. Stronger than expected data, however, might mean some upside for the shared currency as this would encourage the ECB to withdraw more stimulus and move closer to tightening.

Weak data, on the other hand, could lead Lagarde and her fellow policymakers to rethink their plans to hike interest rates soon.