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Euro Breaking News: German and EU Investor Confidence Sink to New Lows, Euro Steady.

Euro Breaking News: German and EU Investor Confidence Sink to New Lows, Euro Steady.

Zain Vawda, Analyst

Euro ZEW Economic Sentiment Key Points:

  • EU ZEW Economic Sentiment Index: Actual -60.7 vs -54.9 August.
  • German ZEW Economic Sentiment Index: Actual -61.9 vs -55.3 August.

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ZEW Economic Sentiment Index in the Euro Area decreased to -60.70 in September from -54.90 in August, while Europe’s most industrialized economy saw an even greater decline in investor morale. The ZEW index in Germany decreased to -61.9 from the September print of -55.3 while the current conditions subindex declined to -60.5 from -47.6.

This shouldn’t come as a surprise given the headwinds facing the German and Eurozone economy as winter approaches, most notably the ever-growing energy and cost-of-living crisis. The economic outlook is expected to deteriorate further prospects of energy shortages in the winter grow while growth in China has shown signs of a slowdown.

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The ZEW Economic Sentiment figure is an aggregation of institutional investors’ and analysts’ six month projections of the economy and functions as a reputable leading indicator. The data carries a lot of weight in the industry as the forecasts of future financial conditions are carried out by highly informed individuals by virtue of their jobs.

Since last week’s unprecedented hike by the European Central Bank (ECB), we have seen gains for the Euro which have pushed it back above parity to the US Dollar. ECB members have been adamant that further rate hikes would be necessary to reign in inflation, with every data point between now and the next meeting holding the key. Could this print be a wake-up call for the ECB as the numbers suggest the ECB may be too optimistic about their economic outlook moving forward.

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Market reaction

EUR/JPY 1-Hour Chart

Source: TradingView, prepared by Zain Vawda

Initial reaction was relatively subdued with a 10-pip spike higher for EURJPY. We currently trade above the 20, 50 and 100-SMA on the 1H chart and seem to be rangebound between 143.909 level and the 145.600 level. On the larger timeframes, The Japanese Yen has been displaying weakness across the board with EURJPY currently trading at 2015 levels. Last week we had a 500-odd pip rally to the upside while opening higher this week and taking out June highs once more.

On the daily timeframe we do trade above the 20,50 and 100-SMA, however the fact that we have had such a bullish upside move we could be due some pullback toward the MA’s. Overall market sentiment has been one of the key drivers of the move and I expect that to continue couple with Yen weakness.

Key Intraday Levels Worth Watching:

Support Areas

  • 143.950
  • 142.940

Resistance Areas

  • 145.584
  • 146.925

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--- Written by Zain Vawda for DailyFX.com

Contact and follow Zain on Twitter: @ zvawda

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

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