Talking Points
- EUR/USD little changed on weaker-than-expected ZEW sentiment data.
- IG Sentiment data show retail investors remain short of EUR/USD.
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The German ZEW indicator of economic sentiment fell by 7.5 points to 10 in August, and missed expectations of 15. According to ZEW President Professor Achim Wambach, the significant decrease of the economic sentiment indicator reflects the high degree of nervousness over the future path of growth in Germany. “Both weaker than expected German exports as well as the widening scandal in the German automobile sector in particular have helped contribute to this situation. Overall, the economic outlook still remains relatively stable at a fairly high level.”
Expectations regarding economic development in the Euro-Zone fell by 6.3 points in August, bringing the expectation indicator to a current level of 29.3 points.
The single currency slipped marginally lower against the US dollar on the release and continues to struggle to regain the 1.18000 mark. However, a combination of a bullish chart set-up and negative client sentiment may see the Euro uptrend starting to resume.
Chart: EURUSD One Minute Timeframe (August 22, 2017)
Retail trader data shows 24.0% of traders are net-long with the ratio of traders short to long at 3.17 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07646; price has moved 9.7% higher since then. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURUSD-bullish contrarian trading bias.
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--- Written by Nick Cawley, Analyst
To contact Nick, email him at nicholas.cawley@ig.com
Follow Nick on Twitter @nickcawley1
