EUR/USD broke out of its falling wedge formation on Monday morning, leaving a considerable amount of bullish potential open for the currency pair. This was much of the reason why I chose “long EUR/USD” as my analyst pick of the week, and assuming risk appetite continues to pick up, the trade should work out well in the near-term. There will be a bit of event risk on hand for the currency on Tuesday morning though, as the IFO index of German business confidence is forecasted to show broad declines in sentiment on the business climate (from 82.6 to a record low of 81.0) and current economic conditions (from 88.8 to a 6-year low of 85.0). However, the outlook component is actually anticipated to rise slightly from a record low of 76.8 to 77.5, which is in line with the latest ZEW results. Indeed, while the German economy is in the midst of recession and the financial markets remain relatively unstable, four rate cuts by the European Central Bank since October and the announcement of a 50 billion euro stimulus plan by German Chancellor Angela Merkel has helped to boost sentiment on the future a bit. This figure can be market-moving on a very short-term basis, so traders should watch for volatility in the euro around the 4:00 ET release time.
Related Article: Euro Weekly Trading Forecast
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