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EUR/USD Remains Under Pressure as ZEW Data Fuels Uncertainty

EUR/USD Remains Under Pressure as ZEW Data Fuels Uncertainty

2020-10-13 11:00:00
Nick Cawley, Strategist

EUR/USD Price, News and Analysis:

  • ZEW economic sentiment declines sharply.
  • EUR/USD struggling to move higher.

The latest ZEW economic sentiment data make for sobering reading with both the German and the Euro Area releases falling sharply lower.

EUR/USD Remains Under Pressure as ZEW Data Fuels Uncertainty

And according to ZEW President Professor Achim Wambach, the recent pullback in sentiment looks over.

The ZEW Indicator of Economic Sentiment is still very clearly in positive territory. However, the great euphoria witnessed in August and September seems to have evaporated. The recent sharp rise in the number of COVID-19 cases has increased uncertainty about future economic development, as has the prospect of the UK leaving the EU without a trade deal. The current situation in the run-up to the presidential election in the United States further fuels uncertainty.’

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The ECB will continue to closely monitor events in the Euro Area, especially with inflation well below the central bank’s stated mandate (2%) and with growth stalling. While the ECB has no fixed currency levels in mind, EURUSD above 1.2000 is likely to see further jawboning by ECB members in an effort to weaken the single currency and give inflation a boost.

EUR/USD currently trades just below 1.1800 and last Friday’s 3-week high of 1.1831 will likely remain as short-term resistance. Above here, there is a cluster of prior highs all the way up to 1.1920 which will act as formidable resistance. A break below last Friday’s low of 1.1758 opens the way to the 20-day simple moving average at 1.1736 ahead of 1.1700. The double low around 1.1610 made in late-September looks unlikely to be tested in the short-term.

EUR/USD Vulnerable to Setback Amid Overbought Positioning – CoT Report

EUR/USD Daily Price Chart (March – October 13, 2020)

EUR/USD Remains Under Pressure as ZEW Data Fuels Uncertainty
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 18% -12% 0%
Weekly 38% -38% -17%
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IG Retail trader datashows 37.03% of traders are net-long with the ratio of traders short to long at 1.70 to 1. The number of traders net-long is 16.88% higher than yesterday and 5.92% higher from last week, while the number of traders net-short is 0.25% lower than yesterday and 6.99% lower from last week.We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise.

Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse lower despite the fact traders remain net-short.

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.