EUR/USD – Inverted Head and Shoulders? Awaiting NFP
Head and Shoulders: Although this is traditionally a bottoming, reversal pattern, the context is important. The EUR/USD is not coming off a trend in the 4H time-frame or even the daily time-frame. In fact it has been consolidating after a 3 month rally, between some major trendlines and resistance/support factors. When its all said and done, I think the most important ones are Resistance: 1.3170 and Support: 1.28. In the mean time, we should anticipate some tension back toward the middle of the range, which is just under 1.30. If the head and shoulders does complete, a swing projection to 1.3060 brings up a gartley pattern, which gives the market bearish suggestions, so make sure to manage your trades tightly or risk getting chopped up.
If you believe this is the swing to bring the market for a breakout, then maybe you can hold it through some shakeout. However there is a key event risk tomorrow before which the market will likely stay put.
NFP: Tomorrow’s US Non-Farm Payroll data has the potential to give the market a chance to test the key resistance/support factors. Forexfactory reports a forecast of 123K after a 114K reading in October (for September). Meeting this expectation of improvement and beyond should be risk-on, and positive for EUR/USD. Missing 100K could be the opposite.
EUR/USD Daily Chart 11/1/2012 10:36AM EDT