EUR/USD: Trading the German IFO Jun 2015

The 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 his higher than the forecast is bullish for the euro.

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

Published on Tuesday at 8:00 GMT.

Update: German IFO disappoints with 109.7 – EUR/USD follows

Indicator Background

The German Ifo Business Climate, a leading economic indicator, acts as an excellent barometer of current and future economic conditions. As one of the most important German economic indicators, its release can have a strong impact on the direction of EUR/USD.

The index remains at high levels, but dipped slightly last month to 110.4 points, shy of the estimate of 111.0 points. The markets are expecting more of the same, with an estimate of 110.3 points.

Last week’s dovish FOMC meeting weakened the dollar, but the euro was certainly not the big winner, and for good reasons. Low inflation still remains a big concern, growth has not picked up, and the still-high value of the euro has not helped matters. German inflation numbers could weigh leave the pair depressed, and so could PMIs. All in all, there is now more room to the downside for the pair. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.37, 1.3677, 1.3650, 1.3585, 1.3550 and 1.35.

5 Scenarios

1. Within expectations: 108.0 to 112.0: In such a case, the euro is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 112.1 to 115.0: An unexpected higher reading can send EUR/USD above one resistance line.
3. Well above expectations: Above 115.0: The chances of such a scenario are low. A second resistance line might be broken on such an outcome.
4. Below expectations: 105.0 to 107.9: A lower reading than forecast could push the pair below one support level.
5. Well below expectations: Below 105.0: In this scenario, EUR/USD could drop below two support lines.

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

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