EUR/USD: Will the Euro-zone ZEW Survey Reflect More Optimistic Sentiment?

Investor sentiment throughout the Euro-zone is anticipate to improve very slightly in May as the ZEW survey is forecasted to edge up to -44.2 from -44.8. Nevertheless, this is not very far from the record low seen last month, and this news will not be entirely surprising as the European Commission’s most recent surveys of economic, industrial, and services sector confidence all dropped more than expected.


What Are The Markets Facing?
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Bonds – 10-Year German Bund Futures
Bunds have fallen quite a bit from Fibonacci resistance at 115.15 and have run directly into support at 113.10, as any possibility of a significant rebound in the contract appears to have faded in the near-term. Upcoming Euro-zone economic releases may shake up Bunds, as the release of the German ZEW survey could weigh the contract down below 113, especially if the data is significantly better than expected. On the other hand, if investor sentiment proves to be more pessimistic than expected, the contract could easily jump up to the 114 level.


FX – EUR/USD
The EUR/USD decline from the record highs just above 1.60 has bounced from the 38.2 percent fib of 1.4437 – 1.6018 at 1.5400/15, and the pair continues to look bullish as Technical Strategist Jamie Saettele mentioned in his Daily Technical Report, “The push through 1.5570 confirms that our bullish stance is correct (and also completes an inverse head and shoulders). The rally from 1.5283 could be a series of 1st and 2nd waves or wave i of a diagonal. Either way, look higher near term. Risk can moved to 1.5396, but support should be strong in the 1.5533/55 zone.” Looking ahead, the release of the Euro-zone and German ZEW surveys could lead the EUR/USD higher for another test of near-term resistance at 1.5650 as investor confidence is forecasted to improve slightly. On the other hand, a surprisingly weak release like we saw last month along with bullish US dollar sentiment could weigh the euro down and keep EUR/USD within range.
Visit our recently updated EUR/USD Currency Room for specific resources geared towards the euro.


Equities – Xetra DAX Index
The Xetra DAX index has done nothing but consolidate within a rising wedge over the past few weeks, but the solid gains witnessed over the past few days may ultimately target the 200 SMA at 7,337. However, it may only be a matter of time before this bearish formation resolves with a break below near-term support near the 7,000 level. While risk trends may remain a greater driver of the index, the upcoming release of the German ZEW survey could spark volatility. Indeed, the ZEW survey is forecasted to reflect a mild improvement, which would be especially bullish for equities. However, if risk aversion comes back into play globally, the ZEW figure may not be able to do much for the DAX as the index would likely pull back sharply toward 7,000.

Written by Terri Belkas, Currency Analyst for DailyFX.com