The German ZEW Economic Sentiment Index is based on a monthly survey of institutional investors and analysts and their views of the German economy. A reading that is higher than the market forecast is bullish for the Euro.
Here are all the details, and 5 possible outcomes for EUR/USD.
Published on Tuesday at 10:00 GMT.
Indicator Background
The German ZEW Economic Sentiment surveys financial experts for their assessment of the direction of economy in the next six months, based on economic data including inflation, exchange rates and the stock market. This makes the index an important indicator of the medium-term future of the German economy.
The indicator finds itself in deep negative territory, indicating a severe lack of confidence in the German economy. Last month’s readings improved slightly, rising to -53.8. The markets are calling for another slight improvement of -49.5. Any improvement in the reading would be welcome news for the markets, given the ongoing financial crisis which is gripping Europe.
Sentiments and levels
The financial crisis in the eurozone appears to be worsening, with last week’s credit downgrades to Italy, France and Austria. There is now talk of a Greek default, which will only make a bad situation worse. So, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.30, 1.2873, 1.2760, 1.2660, 1.3725, 1.2623, 1.2587 and 1.2520.
5 Scenarios
- Within expectations: -53.0 to -44.0: In such a case, the Euro is likely to rise within range, with a small chance of breaking higher.
- Above expectations: -43.9 to -40.0: An unexpected higher reading can send EUR/USD well above one resistance line.
- Well above expectations: Above -39.9: This would indicate some growth and confidence in the German economy. A second resistance line might be broken on such an outcome.
- Below expectations: -53.1 to -57: A sharper decrease than forecast could send the pair below one support level.
- Well below expectations: -57: Due to the turmoil gripping the eurozone economies, a sharp decline cannot be ruled out. In this scenario, the Euro will drop, and could break two or more support levels.
For more on the Euro, see the EUR/USD.