EUR/USD: Trading the German IFO Apr 2015

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 Friday at 8:00 GMT.

 Update: German IFO Business Climate at 108.6

Indicator Background

Ifo Business Climate, a leading economic indicator, is as an excellent barometer of current and future economic conditions. As a market-mover, analysts pay close attention to the monthly releases of the index.

Despite weak economic conditions in the Eurozone, the index has risen for five consecutive readings. In February, the indicator improved to 107.9 points, marking an eight-month high. This beat the estimate of 107.4 points. The markets are expecting the upswing to continue, with the estimate for the upcoming release standing at 108.5 points.

Sentiments and levels

Although the US has been experiencing some weakness, the ECB’s QE program, which is here to stay, will continue to weigh on the euro. A delay in the US rate hike has not done much to damper market enthusiasm with a vibrant US economy. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1113, 1.1050, 1.0910, 1.0760, 1.0615 and 1.0550.

5 Scenarios

1. Within expectations: 105.0 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 116.0: An unexpected higher reading can send EUR/USD above one resistance line.
3. Well above expectations: Above 116.0: The chances of such a scenario are low. A second resistance line might be broken on such an outcome.
4. Below expectations: 102.0 to 104.9: A lower reading than forecast could push the pair below one support level.
5. Well below expectations: Under 102.0: 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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