German ZEW preview: What to expect of EUR/USD?

After a brief period of consolidation around 1.0630 levels, the EUR/USD pair broke further southwards amid renewed USD buying and positive European equities. The major is last seen exchanging hands at fresh session lows of 1.0614, down -0.22% on the day.

Attention now turns towards the German ZEW economic sentiment for December, which will be reported at 10.00GMT later in the EU session.

German ZEW sentiment seen a tad higher in December

The ZEW will release its Economic Sentiment Index for the next six months for Germany, as well as the Current Situation Index, reflecting institutional investors' opinions. The headline economic sentiment index is seen edging higher to 14.0 in Dec after 13.8 registered in Nov. While the current situation sub-index is also expected to improve in Dec, and is seen arriving at 59.1 versus 58.8 last.

Limited reaction is expected on the German data, as the main risk event for the EUR/USD pair remains the FOMC rate decision due tomorrow.

Analysts at Danske Bank note, “Since July, ZEW expectations have followed a rising tendency to 13.8 in November but the December figure may bring this tendency to a halt. The Sentix released last week saw an unexpected fall, which maybe reflected the uncertainty related to the Italian referendum.”

“However, although the 'no' vote in Italy on the Sunday caused an initial fall in equities on the Monday morning, they quickly recovered within the first few hours of the day. Therefore, we expect a somewhat unchanged ZEW with a risk of a small decrease.”

EUR/USD: Technical levels

Aayush Jindal at TitanFx explains, “The pair is currently recovering, and trading above the 23.6% Fib retracement level of the last decline from the 1.0873 high to 1.0523 low. So, there is a chance that the EURUSD pair may bounce and continue to trade higher.”

“On the upside, there is a monster bearish trend line formed on the daily chart, which may act as a resistance. However, an initial hurdle on the upside is around the 50% Fib retracement level of the last decline from the 1.0873 high to 1.0523 low at 1.0699.”