German ZEW preview: What to expect of EUR/USD?

The EUR/USD pair witnessed a 30-pips upward spike in the last hour, driving the rate further beyond 100-DMA in a bid to test 1.1250 barrier. The major is last seen exchanging hands at 1.1238, up +0.48% on the day.

Attention now turns towards the German ZEW economic sentiment for July, which will be reported at 09.00GMT later in the EU session.

German ZEW sentiment to rebound in July

The ZEW will release its Economic Sentiment Index for the next six months for Germany, as well as the Current Situation Index, reflecting institutional investors' opinions. The headline economic sentiment index is seen rebounding sharply to 2.1 in July after minus 6.8 registered in June.

Limited reaction is expected on the German data, as the main risk event for the EUR/USD pair remains the US inflation report due later in the NA session.

Analysts at Danske Bank note, “The impact has been seen mainly on investor sentiment as reflected in the decline in ZEW expectations in July, while the impact on economic sentiment has been limited as seen in resilient PMI figures and ifo expectations. Last week, we got a bit more information with the release of Sentix investor confidence, which increased again in August and thereby points to higher ZEW expectations.”

EUR/USD: Technical levels

Haresh Menghani, Analyst at FXStreet explains, “The pair also seems to be in the process of forming a bearish Rising Wedge chart pattern on short-term chart, with the upper ascending trend-line resistance coinciding with 1.1230 important resistance. Hence, only a decisive move above this strong resistance would pave way for continuation of the pair’s near-term upward trajectory.”

On the flip side, the lower ascending trend-line, near 1.1180 level, should now act as immediate support to defend. A convincing break below this immediate support would confirm the bearish pattern and should trigger an immediate slide, initially towards 50-day SMA support near 1.1150 region and eventually towards the very important 200-day SMA support near 1.1080-75 region.”