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.
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 slide throughout 2014 and dropped to 46.6 points last month, well short of the estimate of 52.8. The reading for the March release stands at 46.3 points. Will the indicator reverse directions and beat the prediction?
Sentiments and levels
The dollar was broadly lower last week as the FOMC minutes were more dovish than expected. However, this move is somewhat overextended, especially as US employment numbers have been solid. As for the euro, it appears to be overvalued and high and Mario Draghi could make an appearance and talk down the currency as it approaches 1.40. In addition, inflation numbers are likely to be revised to the downside, weighing on the euro. So, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.40, 1.3964, 1.3895, 1.3830, 1.38 and 1.3740.
5 Scenarios
Within expectations: 43.0 to 46.0: In such a case, the Euro is likely to rise within range, with a small chance of breaking higher.
Above expectations: 46.1 to 50.0: An unexpected higher reading can send EUR/USD above one resistance line.
Well above expectations: Above 50.0: In such a scenario, a second resistance line might be broken.
Below expectations: 39.0 to 42.9: A sharper decrease than forecast could push the pair below one support level.
Well below expectations: Below 39.0: A very weak release could rattle the markets, and EUR/USD could break a second support level.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.
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