EURUSD might be in for a reversal from its uptrend as price is forming a small head and shoulders on its 4-hour chart. Price looks ready to break below the neckline support to confirm the downtrend.
The 100 SMA is above the 200 SMA to indicate that the path of least resistance is to the upside or that the climb is still likely to resume. The gap between the indicators is widening to reflect strengthening bullish momentum as well. However, EURUSD is falling below the 100 SMA dynamic support as an early indication of selling pressure.
Stochastic is starting to pull up from the oversold region to signal that buyers are taking over while sellers take a break. RSI is also turning higher to show that bullish momentum is returning. If that’s the case, EURUSD could climb back up to the highs around 1.2150.
A break below the 1.2000 handle, on the other hand, could set off a drop that’s the same height as the head and shoulders pattern.
There are a number of mid-tier reports due from the eurozone that could impact the shared currency’s direction, but it’s likely that this pair would take cues from US data. The ADP non-farm employment change report is lined up and would likely serve as a preview for the NFP.
Analysts expect to see a gain of 872K for the ADP reading, higher than the earlier increase of 517K. Coming in line with estimates or beating expectations could mean strong gains for the dollar ahead of the official government release of jobs data, as dollar bulls would likely price in stronger hiring prospects.
The US ISM services PMI and Challenger job cuts figures would also likely impact NFP expectations, with both expected to post gains in employment for the previous month. Analysts expect a 990K NFP reading for April.