The euro has been recovering over the short term, and today's ZEW data will likely bolster this trend. To gain a better understanding of the broader market sentiment of the EURUSD, have a look at our previous comprehensive analysis of the pair.
Germany's economic sentiment improved considerably in November, beating the preliminary market forecasts. The unexpected jump in the ZEW index ended five months of continually deteriorating economic outlook. This welcoming development in the Euro Area's biggest economy had a positive effect on the single currency.
The price of the EURUSD is currently in the process of establishing a new upswing, following a breakout above the Falling Wedge, as seen on the 2H chart above. By virtue of Falling Wedges being classic trend reversal patterns, the upswing itself is likely to be extended even higher. This is further substantiated by the mounting bullish momentum, as underpinned by the histogram of the MACD indicator.
Notice that the breakout above the upper limit of the Wedge was followed by a penetration above the 38.2 per cent Fibonacci retracement level at 1.15802. Currently, the price action is concentrating above the 100-day MA (in blue).
Though an intermediate throwback to 1.15802 from above seems highly probable, the next target for the uptrend is underscored by the 61.8 per cent Fibonacci at 1.16232. Before the price can climb as high, however, it would have to break the major resistance level at 1.16050. It is underlined by the 200-day MA (in orange).
The ZEW economic sentiment index was reported at 31.7 points in November, beating the expectations of 20.3 points. This marks a sizable rebound from the 22.3 index points slump that was recorded a month prior.
The uptick is predicated on the accelerated economic stabilisation in Europe, which was observed by the European Central Bank (ECB) at its latest meeting.