EUR/USD:Trading the German ZEW Investor Confidence Survey.
The German ZEW investor confidence survey is expected to improve for the eighth consecutive month in June, with economists forecasting a rise to a three-year high of 35.0 from 31.1 in the previous month, and expectations for an economic recovery later this year could lead the euro higher as market sentiment improves.Trading the News: German ZEW Survey What's Expected Time of release: 06/16/2009 09:00 GMT, 05:00 EST Primary Pair Impact : EURUSD Expected: 35.0 Previous: 31.1 Impact the German ZEW Survey report had over EURUSD for the past 2 months Period Data Released Estimate Actual Pips Change (1 Hour post event ) Pips Change (End of Day post event) May 2009 05/19/2009 9:00 GMT 20.0 31.1 -15 -10 Apr 2009 04/21/2009 9:00 GMT 2.0 13.0 -1 +22 May 2009 German ZEW Survey Investor sentiment in Germany rose to a three-year high in May as the ZEW survey jumped to 31.1 from 13.0 in April, and the data encourages an improved outlook for future growth as policymakers project economic activity to stabilize later this year. At the same time, the gauge for the current situation slipped to -92.8 from -91.6 in April following the record drop in 1Q GDP, and fears of a protracted downturn may continue to weigh on Europe's largest economy as Bundesbank President Axel Weber anticipates economic activity to remain subdued throughout the year. At the same time, the ECB lowered the benchmark interest rate by 25bp to a record-low of 1.00% earlier this month, and plans to commit EUR 60B in covered-bond purchase in an effort to soften the landing of the economy, and the unprecedented measures taken on by the central bank should help to stem the downside risks for growth and inflation. April 2009 German ZEW Survey The German ZEW investor confidence survey improved for the sixth consecutive month in April, with the index jumping to a two-year high of 13.0 from -3.5 in the previous month however, the current outlook for the economy slipped to -91.6 from -89.4, which is the lowest since September 2003, as the region faces its worst economic downturn in over half a century. The data suggests investors are holding an improved outlook for the future as policymakers take unprecedented steps to shore up the ailing economy and at the same time, the European Central Bank is expected lower the overnight lending rate to a record-low in May as growth and inflation falter. Meanwhile, the ECB is also anticipated to adopt unconventional measures to manage monetary policy beyond the interest rate to shore up the euro-region however, as the Governing Council fails to meet on common ground, the lack of decisive action could weigh on the outlook for future policy. What To Look For Before The Release Traders with access to market depth information via the FXCM Active Trader Platform may use it to gauge the potency of the economic data release as well as to shed some light on the market's directional bias. Increasing volume ahead of the announcement will telegraph likely follow-through behind whatever move is to materialize, while an imbalance in available liquidity on the Bid versus the Offer side of the market will tell us the direction major institutions are likely favoring ahead of the announcement: Bullish Scenario: If we see substantially deeper available liquidity on the Bid side of the market, this tells us that major price providers in the market are looking to buy the Euro against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bullish bias on EURUSD ahead of the data release. Bearish Scenario: If we see substantially deeper available liquidity on the Offer side of the market, this tells us that major price providers in the market are looking to sell the Euro against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bearish bias on EURUSD ahead of the data release. How To Trade This Event Risk The German ZEW investor confidence survey is expected to improve for the eighth consecutive month in June, with economists forecasting a rise to a three-year high of 35.0 from 31.1 in the previous month, and expectations for an economic recovery later this year could lead the euro higher as market sentiment improves. However, the record drop in the first quarter GDP paired with the downturn in global trade could weigh on the outlook for future growth, and fears of a protracted recession could weigh on the exchange rate as policymakers anticipate growth prospects to remain subdued throughout the year. The breakdown of the 1Q GDP report showed capital investments plunged 7.9% from the fourth quarter, while exports slumped 9.7%, and conditions are likely to get worse as the Bundesbank forecasts Europe's largest economy to contract at an annual pace of 6.2% this year. Moreover, consumer prices in the region fell 0.1% in May, while the annual rate of price growth slipped to zero for the first time since recordkeeping began in 1996, and the government may take additional steps to stem the downside risks for growth and inflation as tightening credit conditions paired with financial uncertainties continue to take a toll on the real economy. At the same time, Bundesbank President Axel Weber said that 'the crisis is likely to put a strain on global financial markets and the real sector for some time to come,' and expects the annual rate of unemployment to peak towards the end of 2010 into 2011. Meanwhile, the European Central Bank held the benchmark interest rate steady at the record-low of 1.00% earlier this month and went onto say that the EUR 60B covered-bond purchase will begin next month in an effort to soften the landing of the economy, and long-term expectations for higher borrowing costs may lead the euro higher over the near-term as the central bank attempts to put a floor on the key rate. In addition, Mr. Weber said that the current rate is 'appropriate for the economic outlook,' and went onto say that the Governing Council will take the necessary steps to counter the unprecedented measures taken on by the ECB 'should the overall economic picture improve' in order to mitigate the risks for price stability. Moreover, the Bundesbank head pledged to stem the risk for inflation 'early on', but noted that 'the economy is generally very slow to recover from recession that are associated with real-stated and financial crises,' and the comments reinforces a weakening outlook for global growth as policymakers anticipate a slower economic recovery. Nevertheless, as risk trends continue to drive price action in the foreign exchange market, a rise in market sentiment could lead the euro higher as investors raise their appetite for higher yielding assets. Expectations for a rise in the ZEW survey favors a bullish outlook for the single currency as market participants expect investor sentiment to improve in June, and price action following the release could set the stage for a long euro trade. Therefore, an in-line print, or a rise above 35.0 would lead us to look for a green, five-minute candle following the release to confirm a buy entry on two-lots of EUR/USD, and once these conditions are met, we will place our initial stop at the nearby swing low (or reasonable distance) and this risk will establish our first target. Our second target will be based on discretion, and we will move the stop on the second lot once the first trade reaches its target in order to lock-in our profits. On the other hand, deteriorating trade conditions paired with fears of a protracted downturn may lead investors to lower their outlook for future growth, and an unexpected drop in the ZEW survey could weigh on the exchange rate as growth prospects deteriorate. As a result, if the index drops to 20.0 or lower, we will look to sell the single-currency, and will follow the same setup for a short euro-dollar trade as the long position mentioned above, just in reverse.
2009 Al Bawaba (Albawaba.com)
Provided by Syndigate.info an Albawaba.com company
2009 Al Bawaba (Albawaba.com)
Provided by Syndigate.info an Albawaba.com company
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|Title Annotation:||Center for European Economic Research; European currency; United States dollar|
|Article Type:||Statistical data|
|Date:||Jun 12, 2009|
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