EURUSD Suffers Following Dire German ZEW Survey

The EURUSD encountered a near 50 pip decline following a dismal outcome to the latest German ZEW Survey, which enticed the EURUSD to come within touching distance of the current yearly low (1.3332).

The ZEW Economic Sentiment declined from a 27.1 in July to a dire 8.6 in August. This added further fuel to the fire circulating recently that the German economy has been an unexpected casualty following the geo-political conflict in Eastern Europe. The EURUSD concluded trading at 1.3368. The latest Euro-Zone Industrial Production is announced this morning.

However, EU economic data is high in quantity tomorrow and this is where I am expecting the most market noise. French GDP, German GDP, EU CPI (inflation) and EU GDP are all released. At first sight, the EU CPI and EU GDP may catch the eye of traders but with the ECB implementing stimulus recently, patience may be provided to these results. Therefore, the highest potential release for market volatility should be considered as the German GDP. There is already speculation spreading that German GDP contracted by 0.1% in Q2 and confirmation of this should hit the EURUSD hard. In fact, I would look for a new yearly low to be achieved. Current EURUSD support levels can be found at 1.3361, 1.3343 and 1.3330.

The GBPUSD bounced back yesterday after extending to its lowest valuation since the 11^th June (1.6756) and concluded trading at 1.6815. Investors were likely buying the GBPUSD in hope of another encouraging UK employment report being released late Wednesday morning.

The markets are expecting another 30,000 decline in UK Jobless Claims followed by a 0.1% drop in the overall unemployment rate to, 6.4%. Looking at July’s impressive UK Services PMI (nine-month high) and the acknowledgement that this sector employs around 80% of the UK labor force, I actually see the potential for an even stronger UK employment report. As the UK unemployment rate edges closer to the potential 6% BoE target that Governor Carney hinted might influence the Central Banks decision to raise rates, the GBPUSD bulls should become reignited. GBPUSD resistance can be found at 1.6818 and 1.6841.

The overnight Japanese Gross Domestic Product release came in slightly better than expected and as a result, the USDJPY traded in a narrow 30 pips range before concluding trading at 102.251.

The wider media were anticipating a 7.1% economic contraction, with the confirmed figure being an annualised 6.8%. Still, this represented the largest Japanese contraction since the unfortunate natural disaster in 2011 and highlights how detrimental the April sales tax rise from 5% to 8% has been to domestic expenditure.

Consumer expenditure data from Japan is released on a regular basis and with the sales tax resulting in a decline in spending, this highlights a future opportunity to exploit potential JPY weakness.

Last night’s Westpac Consumer Confidence release provided the AUDUSD with a boost. The release widely surpassed expectations, with the Westpac Melbourne Institute Index of Consumer Sentiment rising by 3.8% in August to 98.5.

A previous Reserve Bank of Australia (RBA) monetary statement did make note of domestic confidence declining following a Federal Budget and this release should calm those fears. The AUDUSD jumped nearly 60 pips on the news and I would expect the positive release to continue encouraging Aussie purchasing. AUDUSD resistance can be found at 0.9289, 0.9303 and 0.9314.