Following a successful break of the double top neckline on the daily time frame, EUR/USD appears poised to test the neckline of the larger head and shoulders formation, which can be seen on both the weekly and daily charts.

Euro zone GDP figures are set for release today and France’s Q1 2013 GDP figure has already come in below expectations, printing a 0.2% decline. Germany, on the other hand, is projected to show a 0.3% rebound over the 0.6% contraction in Q4 2012. However, if the entire region ends up with another negative figure for the quarter, it would mark the euro zone’s sixth quarter in recession.

If that’s the case, EUR/USD could continue to sell off until the next visible support level near 1.2750. Should that level still break, it would confirm the head and shoulders downtrend signal, with the pair slated to make a same drop that’s the same height as the formation.

By Kate Curtis from Trader’s Way