EUR/USD May Fall if German ZEW Data Triggers Euro Selloff

Euro, ZEW Survey Data, EUR/USD Outlook – Talking Points

  • Euro may face high liquidation pressure ahead of German ZEW data release
  • Lockdown from coronavirus may lead to France’s economy contracting 10%
  • EUR/USD may retest familiar support after failing to clear key inflection zone

Asia-Pacific Recap

US equity futures pointed higher heading into Asia’s Tuesday trading session though APAC stocks were mostly in the red along with the growth-oriented New Zealand and Australian Dollars. Brent was trading lower after the May futures contract for WTI plunged over 300 percent and entered into negative territory for the first time in the commodity’s history.

Euro Nervously Eyes German ZEW Data

The Euro may face heightened selling pressure if German ZEW data for April spooks virus-shaken investors with exposure to European assets. The expectations component is anticipated to show a -42.0 print, slightly better than the prior, 11-year low reading at -49.5. On the other hand, the current situation element is anticipated to show a whopping -77.5 figure, which if fulfilled would mark the softest reading since 2008.

While data-induced volatility has become relatively muted, statistics from Germany – the largest Eurozone economy – continue to elicit notable oscillations in the Euro. The ZEW indicator series in particular seems to command a higher-than-usual market premium relative to its statistical peers. Having said that, volatility from this may be tamed as markets turn their attention to a crucial meeting on April 23.

France’s Prime Minister Édouard Philippe warned that with the current lockdown, the second-largest eurozone economy could contract as much as 10 percent in 2020. Policymakers continue to struggle on balancing opening up the economy and alleviating the impact while also hoping to prevent a second wave from hitting what was previously the epicenter of the coronavirus. The US recently dethroned Europe in this regard.

Coronavirus Infections

Chart showing coronavirus

Source: John’s Hopkins CSSE

EUR/USD Outlook

EUR/USD has broken out of the descending resistance channel labelled as “Downtrend Alpha”, though the par’s upside momentum was checked by the lower tier of the 1.0981-1.0989 inflection range. With the slope of depreciation invalidated, the pair may aim to test familiar support at 1.0783, which if broken with follow-through could inspire additional liquidation.

EUR/USD – Daily Chart

Chart showing EUR/USD

EUR/USD chart created using TradingView

EURO TRADING RESOURCES

— Written by Dimitri Zabelin, Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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