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The European Industrial Production index measures production in the important  sectors of  manufacturing, energy supply and mining. An increase from the previous reading is an indication of growth in the European economy, which would reflect positively on the Euro.

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

 Published on Wednesday at 9:00 GMT.

 Indicator Background

Analysts consider the European Industrial Production a minor index, since both France and Germany, which comprise about half of the Euro Zone economy, release their production figures separately. As such, it is not a major market moving event for the EUR/USD, but it is a useful indication of the health of the Euro Zone economy.

Since January 2011, the index has recorded figures between -0.8% and +0.5%, confirming that there has been virtually no growth in the economy in 2011. The forecast for the September reading is a surprisingly high +1.5%; the last time the index showed such an increase was in March 2010. Given the present economic conditions in the Euro Zone, a reading of +1.5% may be overly optimistic.

Sentiments and levels

Growth in the Euro Zone in Q2 was a dismal 0.2%.   Add to the mix the Greek debt crisis, which is threatening to spiral out of control, and the Euro does not look very attractive to  investors and traders nervous about the European economy.  So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3838, 1.3750, 1.3710, 1.3620, 1.3570, 1.3510, and 1.3440.

5 Scenarios

  1. Within expectations: +1.1% to +1.9%: In such a case, the Euro is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: +2% to +2.4%: An unexpected higher reading can send EUR/USD well above one resistance line.
  3. Well above expectations: Above +2.4%: The chances of such a scenario are very low. A second resistance line might be broken on such an outcome.
  4. Below expectations: +0.6 to +1%: A lower increase than forecast will probably cause the Euro to fluctuate, and one support level could be broken.
  5. Well below expectations: Under +0.6%: Due to serious concerns about the Euro Zone economy, such an outcome cannot be ruled out. In this scenario, the pair could break two support is levels.

For more about the Euro, see the  EUR to USD forecast.

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