EUR/USD: Trading The German ZEW Nov 2014

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.

Update:  German ZEW economic sentiment jumps to 11.5 – EUR/USD extends gains

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 medium-term future of the German economy.

The indicator has been on a sharp slide throughout 2014 and dropped to -3.6 points, short of the estimate of +0.2 points. A reading below zero indicates pessimism. The markets are expecting the indicator to limp back into positive territory in the upcoming reading, with an estimate of +0.9 points.

Sentiments and levels

With weak growth and rock-bottom inflation, the fundamental picture remains bleak for the Eurozone and Mario Draghi and his colleagues seem at a loss to improve matters. With a positive outlook for the US, this could fuel the next leg down for the shaky euro.  Germany’s escape from recession allowed EUR/USD to hold up, but this could prove to be a temporary respite.  In the US, signs of wage hikes are beginning to mount, and after the dollar took a break for consolidation, the upward trend could resume. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.2660, 1.2570, 1.25, 1.2440, 1.2360 and  1.2250.

5 Scenarios

1. Within expectations: -2.0 to +4.0: In such a case, the Euro is likely to rise within range, with a small chance  of breaking higher.
2. Above expectations: +4.1 to +8.0: An  unexpected higher reading can send EUR/USD above one resistance line.
3. Well above expectations: Above +8.0: In such a scenario,  a second resistance line might be broken.
4. Below expectations: -6.0 to -2.1: A sharper decrease than forecast could  push the pair below  one support level.
5. Well below expectations: Below -6.0: A very  weak release  could rattle the markets, and EUR/USD could break  a second  support level.

To follow this event live:  [do action=”calendar-event” eventid=”948b6090-fe71-4994-9760-3386e9f49f44″/]