EUR/USD: Trading The German ZEW Sep 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.

Here are all the details, and 5 possible outcomes for EUR/USD.

Published on Tuesday at 9:00 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 slide  for much  of 2015 and dropped to  25.0 points in August, marking a 9-month low. This reading was short of the estimate of 31.7 points. The downward trend is expected to  continue  in September, with an  estimate of  18.3 points. Will the indicator reverse directions and beat the prediction?

Sentiments and levels

A rate hike in the US or alternatively, hawkish talk from Fed chair Yellen could boost the dollar across the board. It would further  underscore  the monetary policy divergence  that also Draghi  reminded us  of and could  push the Euro lower. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.15, 1.1460, 1.1373, 1.1215, 1.1113  and  1.1050.

5 Scenarios

1. Within expectations:  15.0 to 22.0: In such a case, the Euro is likely to rise within range, with a small chance  of breaking higher.
2. Above expectations: 22.1 to 26.0: An  unexpected higher reading can send EUR/USD above one resistance line.
3. Well above expectations: Above 26.0: In such a scenario,  a second resistance line might be broken.
4. Below expectations:  22.0 to 25.9: A  poor reading could  push the pair below  one support level.
5. Well below expectations: Below 22.0: A very  weak release  could  undermine sentiment about the German economy, and EUR/USD could break  a second  support level.

For more on the euro, see the EUR/USD forecast.

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