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 Economic Sentiment at 54.8 points; Core CPI up to 0.7%
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.
The indicator has been on a steady rise and has improved over four consecutive readings. The February release improved to 53.0 points, although this fell short of the forecast of 55.4 points. The reading for the March report is expected to jump to 58.9 points. Will the indicator match of beat this rosy prediction?
Sentiments and levels
Sentiment is working against EUR/USD from both sides: QE has just started, but has been a success story so far and Draghi reiterated that the good forecasts depend on implementation: no stop in QE. EUR/USD is already not so far away, and it seems that the euro-zone economies will love it. Over in the US, the Fed will likely remove forward guidance in preparation for a rate hike. Although last week’s retail sales and consumer confidence numbers disappointed, the solid core inflation and robust jobs reports pave the way forward for a hike in June. So, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.0760, 1.0635, 1.0550, 1.05, 1.0360 and 1.0170.
5 Scenarios
- Within expectations: 56.0 to 62.0: In such a case, the euro is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 62.1 to 66.0: An unexpected higher reading can send EUR/USD above one resistance line.
- Well above expectations: Above 66.0: In such a scenario, a second resistance line might be broken.
- Below expectations: 52.0 to 55.9: A sharper decrease than forecast could push the pair below one support level.
- Well below expectations: Below 52.0: A very weak release could rattle the markets, and EUR/USD could break below a second support level.
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