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 continues to point to sluggish German economic sentiment, as the indicator has been stuck in negative territory since May. The index weakened in November, dropping to -15.7 points. This was well below the estimate of -9.9 points. The markets are expecting an improvement in this month’s reading, with an estimate of -11.4 points.
Sentiments and levels
The economic situation in the euro-zone continues to deteriorate, and the malaise is also gripping the three biggest countries: Italy, France and Germany – as the recent Bundesbank forecasts show. And while Greece has been granted a reprieve, its return to GDP levels last seen in 2001 and an unemployment rate of 26% mean that it will probably need debt restructuring. Even Angela Merkel knows that Germany will pay the price,but she will want to delay an unpopular until after the German elections in 2013.
Back in the US, the Federal Reserve has its eye on the empty part of the glass regarding the US economy: despite strong job gains and stronger Q3 growth, the wider unemployment picture is damp, and here are wider unemployment picture is damp. The Fed could easily introduce more monetary easing (QE4 / QE Infinity 2). So, in the ugly contest between the euro and the dollar, we could see a tie this week. The fiscal cliff talks could be a wildcard, but currently not much is happening, although that could change quickly as we approach the end of the year. So, the overall sentiment is neutral on EUR/USD towards this release.
Technical levels, from top to bottom: 1.3080, 1.3030, 1.2960, 1.2880 and 1.28.
5 Scenarios
- Within expectations:-15.0 to -7.0: In such a case, the Euro is likely to rise within range, with a small chance of breaking higher.
- Above expectations: -6.9 to -3.0: An unexpected higher reading can send EUR/USD well above one resistance line.
- Well above expectations: Above -3.0: A reading close to the zero level would indicate improving confidence in the German economy. A second resistance line might be broken on such an outcome.
- Below expectations: -15.1 to -19.0: A sharper decrease than forecast could send the pair below one support level.
- Well below expectations: Below -19.0: In this scenario, EUR/USD could break two or more support levels.
For more on the Euro, see the EUR/USD.
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