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German ZEW weighs on EUR

Market Analysis

EURJPY, H4

German ZEW investor confidence much weaker than expected, with the headline reading falling back to 10 from 17.5 in the previous month. The current conditions indicator still improved, and the positive headline reading still suggests that optimists outnumber pessimists, but the third consecutive decline suggests a slowdown in growth ahead, after what still looks like strong third quarter of the year. More arguments then for the ECB to remain cautious on tapering announcements.

Banks and automakers weigh on ZEW. The sector breakdown for the German ZEW, which asks about the prospects over the next 6 months, showed sharply negative readings for banks amid a stronger EUR, but in particular automakers. The latter have been still reporting good results this earnings season but the diesel scandal as well as Brexit prospects and in particular the strong currency are all negatives facing the sector. The ZEW reading for the car sector dropped to -37.3 from -5.5, for banks the outlook dropped to -13.5 from -1.6, highlighting that the number of pessimists is far higher than those optimistic about the outlook

EURJPY lifted back lower on the anticipation of the data, while it is currently traded at 128.50. The cross carved out a 8 session low in the hourly chart since early today, after logging at 128.74 yesterday. The EUR has  come under pressure on the weak data announcement, and hence it is traded in the 4-hour chart below the 50-period MA, while it has just manage to hit 20-period MA.

Hence on the intraday strength of Yen, a SHORT Position was taken in the 4-hourly chart, with entry at the 20-period MA, which is at 128.60. Significant part of this trade is the Evening Star formation noticed in the particular chart, indicating that Bulls might lose some momentum o f the market. Target was set at 30.2  Fibonacci level which is at 128.00, in which we might seen pair retracing.  The support level is at 129.30. The RSI is at 45, looking down in both 4 hours and Daily chart.

 

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Andria Pichidi

Market Analyst

HotForex

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