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Euro Latest - EUR/USD Rally Continues, Mixed German ZEW Readings

Euro Latest - EUR/USD Rally Continues, Mixed German ZEW Readings

Nick Cawley, Strategist

ZEW Data and EUR/USD Price, News and Analysis:

  • Mixed messages from ZEW data as economic sentiment jumps.
  • EUR/USD nears a fresh two-week high
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German ZEW Data – Too Optimistic?

The latest German ZEW data produced a mixed set of readings with economic sentiment soaring while the assessment of the current economic conditions continued to fall. The May economic sentiment index jumped to a five-year high of 51 versus expectations of 32 and a prior reading of 28.2, while the current conditions index fell to -93.5 compared to expectations of -88 and a prior -91.5. The Euro-Zone sentiment index rose to 46 from a 25.2 in April.

Commenting on the release, ZEW President Professor Achim Wambach said,

“Optimism is growing that there will be an economic turnaround from summer onwards. This is also reflected in the significant improvement in expectations for the individual sectors. According to the financial market experts surveyed, economic growth is expected to pick up pace again in the fourth quarter of 2020. However, the catching-up process will take a long time. Only in 2022 will economic output return to the level of 2019,”

EU Rescue Fund Helps Underpin the Euro For Now

The proposed EUR500 billion rescue fund announced yesterday gave the single currency a boost and helped lower government bond yields on the countries most hit by the economic damage wrought by the coronavirus. The fund will provide grants, not loans, to the countries most in need and will be funded by a set repayment plan provided for by future EU budgets. The plan, proposed by EU-heavyweights Germany and France, may still run into objections from certain EU member states, including Austria and the Netherlands, who believe that the rescue fund should provide loans and not grants to other EU countries. The French Finance Minister recently said that this proposed fund will probably not be available until 2021 which may be too late for some EU members.

EURUSD is nudging levels last seen two weeks ago, helped by yesterday’s announcement, and is approaching a cluster of resistance levels. The 38.2% Fibonacci retracement level at 1.0965 is currently under pressure, ahead of the 200-dma at 1.1012 and the May 1 multi-week high at 1.1018. A close above here would expose the 50% Fibonacci level at 1.1066. A cluster of old lows protect 1.0764.

EUR/USD Daily Price Chart (November 2019 – May 19, 2020)

EUR/USD Bullish
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -19% 22% -1%
Weekly -41% 104% -6%
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What is your view on EUR/USD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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