Eurusd drops as euro area economic sentiment declines

EURUSD Analysis

Performance after Tuesday
Period	Pct	Chg	Momentum
Tuesday	-0.34%	-36.6 Pips
Week to-date	-0.91%	-97.3 Pips
November	-2.47%	-268.5 Pips

Upcoming key events (London Time)

Wed 01:30 PM USD CPI Inflation Rate (12-mth)
Thu 10:00 AM EUR GDP (seasonally adjusted) (3-mth)
Thu 01:30 PM USD PPI excluding Food and Energy sectors (12-mth)
Thu 08:00 PM USD Federal Reserve Chair Jerome Powell speech

What happened lately

The Euro Area’s economic sentiment according to the ZEW survey experienced a decline, with a drop from 20.1 points in October to 12.5 points in November. This decrease indicates a deteriorating outlook for the region’s economy, possibly reflecting concerns over inflation, growth prospects, or geopolitical uncertainties that are influencing investor and analyst sentiment negatively. This downward trend mirrors the sentiment seen in Germany, which experienced sharper declines in its economic outlook.

In Germany, the ZEW Indicator of Economic Sentiment dropped significantly from 13.1 points in October to 7.4 points in November, suggesting growing pessimism about the economic future. Additionally, the evaluation of Germany’s Economic Situation fell further, hitting -91.4 points compared to -86.9 points in the preceding month. These figures suggest that confidence in Germany’s economic performance is waning, potentially due to economic challenges, supply chain issues, or external economic factors affecting the German economy.

Furthermore, according to Destatis, Germany’s Harmonised Index of Consumer Prices (HICP) for October showed no change, recording a steady rate of 2.4% from September. This stability in consumer prices, despite economic sentiment declines, might indicate that inflationary pressures are stabilizing even as economic confidence deteriorates. Such data may hint at an underlying stability in consumer price levels despite broader economic pressures.

These economic data points from the Euro Area and Germany have notable implications for the EURUSD currency pair. The broader decline in economic sentiment, particularly in key Eurozone economies like Germany, likely contributed to the recent downward pressure on the EURUSD, which fell by 0.34% to a level of 1.06176. Negative sentiment can lead to weaker euro performance as investors adjust their expectations for growth and potential European Central Bank policy shifts. Additionally, with upcoming high-impact economic events such as the US CPI inflation data and speeches from Fed Chair Jerome Powell, there may be further volatility and shifts in the EURUSD pair depending on market responses to these events. Thus, any further weakening of European economic indicators compared to US data could continue to exert downward pressure on the EURUSD in the near term.

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What can we expect from EURUSD today?

EURUSD on Tuesday dropped -0.34% to 1.06176. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for EURUSD looks bearish as the pair posted lower in Tuesday trading session.

Looking ahead for the day, immediate support level is at S1 1.05871 with break below could see further selling pressure towards S2 at 1.05566. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.06631 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.05946 would indicate selling pressure.

For the week to-date, take note that EURUSD is bearish as the pair posted lower by -0.91%.

Key levels to watch out:

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