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

EUR/USD is seen extending its retreat from near 100-DMA resistance and now launches an attack towards 1.07 handle, as the greenback picks significant strength against its main peers amid positive bias seen in the US treasury yields. The major is last seen changing hands at 1.0715, recording a -0.14% loss on the day.

The immediate focus now remains on the German Ifo surveys, which are lined up for release at 0900GMT in the European session this Wednesday.

Ifo business climate to tick higher in Dec

The headline Ifo Business Climate Index is expected to remain unchanged at 110.5 in Nov,. The Current Assessment sub-index is also seen unchanged at 115 this month, while the Ifo Expectations Index – indicating firms’ projections for the next six months – is expected to show a slight deterioration to 106.01 in Nov, as compared to October’s 106.1 reading.

The Surveys are expected to show very little improvement in the business conditions in Germany, which could keep the EUR/USD pair supported at 1.07 handle. On a bearish surprise, the EUR/USD pair could drop further to test 10-DMA at 1.0688, below which 20-DMA at 1.0620 remains exposed.

Analysts at Danske Bank note, “The German IFO expectations survey marks the most important economic data release in the European session. We have seen strong leading indicators in the December PMIs and other German survey indicators.”

“ZEW released last week also showed an increase in expectations although the current situation figure was the strongest. We thus expect the IFO figure to increase further in January. Together with the strong PMIs, these survey indicators imply quarterly growth in Q4 of around 1%, significantly above the 0.2% growth in Q3.”

EUR/USD Technical Levels

Haresh Menghani, Analyst at FXStreet explains, “With short-term indicators still in bullish territory, the corrective slide is more likely to find support near 1.0715-10 area, marking 38.2% Fibonacci retracement level of 1.1300-1.0340 downslide. However, a convincing break below this immediate support, and a subsequent break below 1.0680-75 horizontal support, is likely to accelerate the corrective move towards 1.0625 intermediate support, en-route 50-day SMA strong support near 1.0590-85 region.”

“On the flip side, momentum above 1.0760-65 immediate hurdle now seems to lift the pair beyond 1.0800 round figure mark towards testing 50% Fibonacci retracement level resistance near 1.0820 level and 100-day SMA hurdle around 1.0840-45 region.”