EUR/USD forecast: Bulls remain cautious ahead of German Zew survey

• A modest USD rebound exerted some pressure on Monday.
• Investors now seemed reluctant to place any aggressive bets.
• Traders now eye the German Zew survey for a fresh impetus.

The EUR/USD pair lacked any firm directional bias and seesawed between tepid gains/minor losses amid a rather subdued trading action on the first day of a new week. Despite a positive outcome from the much-hyped US-China trade negotiations, a generally cautious mood around global financial markets benefitted the US Dollar perceived safe-haven status against its European counterpart and turned out to be one of the key factors that kept a lid on the pair's recent positive move to three-week tops. Investors preferred to wait for more details over last week's agreement as Chinese media sounded much less enthusiastic.

German Zew survey in focus

On the economic data front, the Euro-zone industrial production rose 0.4% on a monthly basis in August. The positive reading, however, was largely negated by a larger-than-expected drop in the annual rate, which fell 2.8% during the reported month. Meanwhile, Vice-president Luis de Guindos on Monday reiterated that he does not expect the Euro-zone to enter into a recession and noted that the latest development regarding the United States-China trade deal was good news, though did little to provide any meaningful impetus to the shared currency.
 
The pair finally ended the day with only modest losses and extended its sideways consolidative price action through the Asian session on Tuesday. Market participants now look forward to the German Zew survey, scheduled for release at 09:00 GMT, for a fresh impetus. The Economic Sentiment Index is anticipated to fall further to -27.3 in October from -22.5 previous, while the Current Situation Index is also expected to deteriorate further to -26 from September's reading of -19.9. Later during the early North-American session, the release of Empire State Manufacturing Index from the US might further collaborate towards producing some short-term trading opportunities.

Short-term technical outlook

From a technical perspective, the overnight price action might still be seen as consolidative. Given last week’s move beyond an important confluence resistance near the key 1.10 psychological mark – comprising of a near four-month-old descending trend-line and 23.6% Fibonacci level of the 1.1412-1.0879 downfall – the near-term set-up remains tilted in favour of bullish traders.
 
A sustained move beyond the 1.1075-80 region (38.2% Fibo. level) will reinforce the constructive outlook and assist the pair to surpass the 1.1100 round-figure mark towards testing another confluence resistance near the 1.1140-45 region. The latter coincides with 100-day SMA and 50% Fibo. level, which if cleared decisively now seems to pave the way for an extension of the recent goodish recovery move from near 2-1/2 year lows.
 
On the flip side, the mentioned confluence resistance breakpoint, currently near the 1.10 mark, might continue to protect the immediate downside. Weakness below the said handle might prompt some long-unwinding trade and accelerate the slide back towards the 1.0960-55 horizontal support.