EUR/USD: Trading The German IFO Apr 2014

German Ifo Business Climate is a monthly composite index of about 7,000 businesses, which are surveyed about current business conditions and their expectations concerning economic performance over the next six months. A reading which is higher than the estimate is bullish for the euro.

Here are all the details, and 5 possible outcomes for EUR/USD.

Published on Thursday at 8:00 GMT.

Indicator Background

German Ifo Business Climate is highly respected by analysts and should be treated as a market-mover by traders.

The indicator continues to trade at high levels, and the February reading came in at 110.7 points, just shy of the estimate. Little change is expected in March, with an estimate of 110.5 points.

Sentiments and levels

The clouds of deflation are gathering above the euro-zone and the ECB has not taken action, but that could change. Draghi could keep the pressure on the common currency once again. EUR/USD is still too high for the ECB’s liking, as the currency is very close to 1.40, the line in the sand for the central bank. The only economy showing some life is that of Germany, and if the region’s number one economy hits some turbulence, the high-flying euro could take a nasty dive. On the other side of the pond, US data surprises to the upside more often, and key employment numbers have been respectable. Even if the rebound only began late in March and not beforehand, evidence from April already looks very encouraging. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3964, 1.3895, 1.3830, 1.38, 1.3740 and 1.37.

5 Scenarios

1. Within expectations: 107.0 to 113.0: In such a case, the euro is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 113.1 to 117.0: An unexpected higher reading can send EUR/USD above one resistance line.
3. Well above expectations: Above 117.0: The chances of such a scenario are low. A second resistance line might be broken on such an outcome.
4. Below expectations: 103.0 to 106.9: A lower reading than forecast may push the pair below one support level.
5. Well below expectations: Below 103.0: In this scenario, EUR/USD could take a hit and drop below a second support line.

For more on the Euro, see the EUR/USD forecast.

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