EUR/USD Stops at Resistance After Weak German Economic Sentiment

The important economic sentiment survey by ZEW fell from 14.1 to 7.6 points, worse than a fall to 11.7 points that was expected. This was met with a small drop from EUR/USD, that stops at the resistance line following this release.

The related figure for the whole continent dropped from 31 to 19,7, also significantly worse than 29.8 that was predicted. The focus is usually on the German number, but both disappointment mount.

EUR/USD now trades at 1.4440, halting under 1.4450. It’s important to note that the Euro didn’t react with a significant drop, at least not yet – but with a halt.

This important German survey of 350 analysts and investors is considered as one of the best barometers for the mood in Europe’s largest economy and for the whole continent.

In the last report, the people surveyed expressed concern that the rate hike may undermine growth in Europe. This probably was the reason for weakness now as well.

The rate hike, and future hikes will probably curb inflation before it manages to lift its head. This is useful for successful, growing countries such as Germany. But for many other countries in the periphery of the continent, this move means that the attempts to recover will meet another barrier – another barrier that could leave them in recession for a long time.

During the Asian session, EUR/USD weakened and dropped below 1.44, resting after the huge gains last week (following the rate hike). But towards the release, it made a big comeback and stopped only at the 1.4450 resistance line.

Levels above are 1.4580, followed by 1.47. Below, we find 1.4282 and 1.4160. For more technical levels, analysis and upcoming events in this busy week, see the EUR/USD Forecast.