EUR/USD: Trading The German ZEW Feb 2015

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 53 – slightly below expectations 

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 sharp upward trend and jumped to 48.4 points in January, well above the estimate of 40.1 points. The positive momentum is expected to continue, with the estimate standing at 56.2 points for the February report. Will the indicator repeat and beat the prediction?

Sentiments and levels

The general direction of EUR/USD is affected by monetary policy divergence and remains to the downside. Still, the euro could bounce back this week if there is some progress in the current Greek crisis. In addition, the euro-zone economies are already reaping the benefits from the weaker euro, as was evident in the recent PMIs. In the US, the meeting minutes from the Fed could balance the recent statement  and present a more dovish stance regarding a rate hike. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1650, 1.1540, 1.1460, 1.1373, 1.1270 and 1.1113.

5 Scenarios

1. Within expectations: 53.0 to 59.0: In such a case, the euro is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 59.1 to 63.0: An unexpected higher reading can send EUR/USD above one resistance line.
3. Well above expectations: Above 63.0: In such a scenario, two or more resistances line might be broken.
4. Below expectations: 50.0 to 52.9: A sharper decrease than forecast could push the pair below one support level.
5. Well below expectations: Below 50.0: A very weak release could see EUR/USD break two or more support levels.

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