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EUR/USD Slides Lower as Weak German Economic Sentiment Sparks New Recession Fears

EUR/USD Slides Lower as Weak German Economic Sentiment Sparks New Recession Fears

Nick Cawley, Strategist

ZEW and EUR/USD Price, News and Analysis:

  • ZEW sentiment readings miss lowly expectations.
  • EUR/USD client sentiment mixed.

The German ZEW economic sentiment reading for November has once again taken a sharp decline, plummeting 17.1 points to 39.0, according to the latest report. According to ZEW President Professor Achim Wambach, “Financial experts are concerned about the economic impact of the second wave of COVID-19 and what this will entail. The ZEW Indicator of Economic Sentiment has therefore once again significantly decreased in November, indicating a slowdown of economic recovery in Germany. There is also the additional worry that the German economy could head back into recession’.

The single fell back to 1.1800 after the ZEW survey was released. The US dollar has picked up a small bid, helped in part by higher US Treasury yields, and a risk-on tone across the market, driven by Joe Biden’s presidential victory and positive coronavirus drug news. The pair touched a multi-week high around 1.1920 yesterday but the subsequent sell-off produced a bearish engulfing candle formation, suggesting lower prices ahead.

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EUR/USD Daily Price Chart (April – November 10, 2020)

EUR/USD Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -4% -26% -9%
Weekly 28% -45% 0%
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IG Retail trader datashow27.83% of traders are net-long. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise.Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/USD trading bias.

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.