A Jump In German ZEW Would Validate Near-term Euro Bullish Technical Outlook

German business confidence is expected to jump to 20 from 13 in April on the back of the ECB’s initiation of quantitative easing measures in conjunction with bringing their benchmark rate down to 1.00%. An inline print would signal that there were 20% more optimistic investors than pessimistic ones which would be the highest reading since June 2007.

                                            [B]May 18[/B]

                                   [B]German Zew (Economic Sentiment)(MAY) (GMT   09:00: 05:00 EDT)[/B]

                                                     [B][/B]

                                   [B]Expected:                     20[/B]

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                                   [B]Previous:                      13[/B]

German business confidence is expected to jump to 20 from 13 in April on the back of the ECB’s initiation of quantitative easing measures in conjunction with bringing their benchmark rate down to 1.00%. An inline print would signal that there were 20% more optimistic investors than pessimistic ones which would be the highest reading since June 2007. Additionally, the current situation reading is also expected to improve for the first time in seven months from -91.6 to -90. The indicator has been very market moving and bears watching. However, it generally has its strongest impact on price action when the number misses in the opposite direction. So, watch out for a disapoityning number as it could sink the euro. Nevertheless, increased optimism should provide Euro support and validate the EUR/USD near-term bullish outlook and justify a long position.

A push above 1.3742 is still required to satisfy the minimum requirement for wave Y, at which time I will expect a top and reversal (objectives are at points from 1.3800 to 1.4200). The near term trend is bullish as long as price is above 1.3250 but there is a count that could lead to a triangle unfolding as wave B from the March high (1.3742). Due to other USD counts, the bullish count seems more probable at this point.

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To discuss this report contact John Rivera, Currency Analyst: <[email protected]>