EUR/USD: Trading The German ZEW Dec 2014

German ZEW Economic Sentiment 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.

Update: German ZEW jumps to 34.9 points – EUR/USD rises

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

Published on Tuesday at 10:00 GMT.

Indicator Background

German ZEW Economic Sentiment surveys financial experts for their assessment of the direction of the German 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.

In November, the indicator bounced back with a strong reading of 11.5 points, crushing the estimate of 0.9 points. The markets are expecting the upward surge to continue, with the estimate standing at 19.8 points. Will the indicator meet or beat this rosy prediction?

Sentiments and levels

The divergence in monetary policies between the ECB and the Fed are consistent with the long term downtrend, but we could see a pause right now. An expected strong German business confidence report and some caution from the Fed are likely to prevent any sharp drops from the pair before Christmas. So, the overall sentiment is neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.2570, 1.25, 1.2450, 1.24, 1.2360 and 1.2280.

5 Scenarios

1. Within expectations: 17.0 to 23.0: In such a case, the Euro is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 23.1 to 27.0: An unexpected higher reading can send EUR/USD above one resistance line.
3. Well above expectations: Above 27.0: In such a scenario, a second resistance line might be broken.
4. Below expectations: 13.0 to 16.9: A sharper decrease than forecast could push the pair below one support level.
5. Well below expectations: Below 13.0: A very weak release could result in the EUR/USD breaking a second support level.

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