EURUSD lost its shine after dismal German ZEW economic santiment. It hit a low of 1.05940 at the time of writing and is currently trading around 1.06068.
The ZEW Indicator of Economic Sentiment for Germany has dropped to 7.4 points, showing a decrease in confidence among financial experts. This decline follows a rise to 13.1 points in October, after a low of 3.6 points in September. The fall in sentiment is mainly due to ongoing worries about inflation and uncertainty regarding the European Central Bank's monetary policy, leading to concerns about the overall economic outlook and growth expectations.
Donald Trump's proposed trade tariffs, including a potential 10% universal tariff, could significantly impact Europe's economy, potentially reducing GDP by up to 1.5% and particularly affecting trade-dependent countries like Germany and the Netherlands. Sectors such as automobiles and chemicals, which account for a large portion of EU exports to the U.S., are expected to be especially vulnerable, with Germany potentially experiencing a 0.5% GDP decline. As the European Central Bank may need to lower interest rates in response, this could create a divergence in monetary policy compared to the U.S., where rates might continue to rise. Additionally, Europe risks falling into recession if prolonged trade conflicts arise. Meanwhile, political turmoil in Germany following the collapse of Chancellor Olaf Scholz's coalition government, along with rising far-right extremism, adds further uncertainty to the country's economic outlook.
Technical Analysis Overview
The pair remained below both short-term (34 and 55-4H EMA) and long-term (200-4H MA) moving averages.
Resistance Levels: Near-term resistance is at 1.0660. A breakout above this could push the pair towards targets at 1.070/1.0760/$1.0835, and possibly 1.0900. Major bullish momentum is expected only if prices surpass 1.1000, which would open the door to 1.1070 and 1.1150.
Support Levels: Immediate support is at 1.06000. A drop below this could lead to further declines to 1.0560/ 1.0500.
Indicator Insights (4-Hour Chart): The Commodity Channel Index (CCI) indicates a bearish trend, while the Average Directional Movement Index (ADX) suggests a bearish outlook.
Trading Strategy
Given the weak sentiment in technical indicators, a sensible strategy would be to sell on rallies around the 1.0660 mark, with a stop-loss at 1.0700 and a target price of 1.0500 for potential gains.
