EUR/USD: Trading the German ZEW Economic Sentiment


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 10:00 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 economic outlook of the German economy for the next six months.

The indicator slipped to 10.2 points in January, compared to 16.1 points a month earlier. Still, this beat the estimate of 8.2 points. The downward slide is expected to intensify in February, with an estimate of just 0.1 points. A reading near zero or in negative territory could push the euro lower.

Sentiments and levels

EUR/USD could reverse directions and lose ground, with the bottoming out of poor US data and also growing support for significant moves from the ECB. A March rate hike by the Fed remains in the cards, if the US economy can show some improvement. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1373, 1.13, 1.1220, 1.1140, 1.10 and 1.0925.

5 Scenarios

  1. Within expectations: -0.3 to +0.2: In such a case, the euro is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 0.3 to 0.7: An unexpected higher reading can send EUR/USD above one resistance line.
  3. Well above expectations: Above 0.7: In such a scenario, a second resistance line might be broken.
  4. Below expectations: -0.8 to -0.4: A sharper decrease than forecast could push the pair below one support level.
  5. Well below expectations: Below -0.8: A very weak release could rattle the markets, and EUR/USD could break a second support level.

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

Get the 5 most predictable currency pairs

About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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