Euro Reality Check

The highly regarded ZEW Economic Sentiment survey showed pessimism in Europe’s locomotive. This stopped the Euro’s rally and reminded everybody that the European issues are far from over.

EUR/USD now trades at the bottom of the current range, failing to top an important resistance line. That’s what happens when pessimism takes over:

The German ZEW Economic Sentiment score minus 4.3 points – the lowest in 19 months. Not only did this result fall short of expectations (+10.7), not only did fall from last month’s number (+14), but the negative number has an important meaning – pessimism.

This is the fourth consecutive fall and also the fourth consecutive time that the result is weaker than expected. Also the all-European number, which is less important, disappointed at +4.4 points. At least it remained in positive territory.

EUR/USD loses hot air

Earlier this week, the Euro enjoyed the Basel III accord regarding the stability of banking. It also enjoyed strong news from steaming hot China. The optimistic mood pushed the pair above the 1.2770 line, and quickly above the 1.2840 line. The pair made a push towards the 1.2930 line and already reached 1.2910 before the release.

But after the release, the pair dropped to 1.2840, which provided supported, before recovering. A break above 1.2930 will lead to resistance at 1.30, 1.3110 and 1.3267. A break below 1.2840 will open the road to 1.2770, 1.2665 and 1.2610.

Also last week, a reminder of the European debt crisis sent the pair down.

Similarly now, economic indicators provide the reality check.

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