Euro eyes German Economic Sentiment

The euro has started the week with slight gains. Currently, EUR/USD is trading at 1.1589, up 0.19%.

German Economic Sentiment next

Eurozone Investor Confidence for November accelerated from 16.9 to 18.3, giving the euro a slight lift. However, the currency faces a tougher test on Tuesday with the release of the German ZEW Economic Sentiment index. This key indicator has been in freefall in recent months after hitting 84.4  in May. In October, the index slowed to 22.3 and the consensus for November is around 20.0. With Covid infection rates rising at an alarming rate in Germany, the question is how this will affect the mood of businesses and investors. If pessimism continues to grow and the indicator continues to slow down, the euro could reverse directions and head lower.

Another factor that could weigh on the euro is the simmering dispute over the Brexit protocols for Northern Ireland. Tensions are worsening as the UK and the eurozone are at odds as the UK wants to reopen the protocols over trade rules between North Ireland and the rest of the UK.

In the US, the nonfarm payrolls report was stronger than expected at 531,000, but the US dollar was unable to take advantage. Equity markets did move higher, which points to the financial markets buying into Jerome Powell’s assurance that the Fed does not have any plans to raise interest rates in the near future. Powell continues to insist that inflation is transitory, although the markets are not so sure. The ECB remains in accommodative mode and like the Fed, has dismissed higher inflation as a temporary factor. ECB President Christine Lagarde said last week that the ECB would not raise rates before 2023.

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EUR/USD Technical

• There are resistance lines at 1.1618 and 1.1669
• 1.1515 is the next support level. Below, we find support at 1.1463

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