EURUSD Potential Breakout (Feb 3, 2016)

Price is currently testing the top of the pattern, which might continue to hold as resistance. 

If so, EURUSD could move back to the bottom of the pattern at the 1.0875 level or perhaps go for a downside break. Stochastic is already indicating overbought conditions, which suggests that buying pressure is exhausted. RSI starting to move south so price might follow suit. 

The moving averages are still oscillating for now, indicating indecision between buyers and sellers. An upside break from the triangle resistance could spur gains of around 300 pips, which is roughly the same height as the chart pattern. 

Event risks for this trade include the NFP release on Friday, with analysts expecting weaker hiring gains of 192K compared to the previous 292K figure. Earlier labor indicators from the ISM surveys have indicated declines in the employment component, hinting at the possibility of a downside surprise. 

Final services PMI readings from the euro zone's top economies are up for release today, along with the US ADP non-farm employment change and ISM non-manufacturing PMI report. Strong data from the euro zone combined with weak readings from the US could be catalysts for an upside breakout.

ECB Governor Mario Draghi is set to give a testimony tomorrow and dovish remarks or hints of further easing could keep weighing on the shared currency. Other factors that could impact EURUSD action include changes in market sentiment, possibly driven by oil price moves. 

By Kate Curtis from Trader's Way