German ZEW: The lowest level seen since 2012

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HotForex Market Review
HotForex Market Review

GER30,H1

German ZEW investor confidence weaker than expected. The headline expectations reading fell back to -16.1 in June from -8.2 in May – a sharper decline than anticipated and indicating that the number of those pessimistic about the outlook is now clearly exceeding the number of optimists. Indeed, this is the lowest reading since September 2012 and considerably below the long term average of +23.3. The assessment of the current situation declined by 6.8 points to now 80.6. ZEW’s Wambach reported that the latest escalation of trade conflicts as well as concerns that the new Italian government will undermine financial stability in the Eurozone left their mark on the overall reading.

At the same time, a weaker than expected data round for April are adding to concern about the outlook for the German economy, although the reading for the economic situation in the Eurozone actually dropped even more than the German one. More signs then that the German and Eurozone recoveries have already peaked and might cool much faster than previously thought. This however, is not likely to prevent the ECB from committing to a phasing out of QE by the end of the year at Thursday’s council meeting, but instead a relatively dovish language and guidance on rates is expected from Draghi.

European stock markets extended yesterday’s gains in early trade, with the UK100 gaining 0.16% so far and the Euro Stoxx 50 up by 0.22%. The GER30 however, reverts slightly from 12,930 peak during London open, with losses being extended on the  weaker than expected ZEW reading.

The  German benchmark (GER30) is currently traded close to 12,830.00, which is the 20-period MA barrier in the 1-hour chart. Therefore, the index is currently fluctuating between lower and upper Bollinger Bands pattern. The next area that could provide some support to the index, is between 50 and 200-period MA, at 12,800-12,810.  A swing back higher at the latest Daily up fractal, at 12,930 could be possible if the index manage to held above the particular support area.

Oppositevely, a break below 12,800-12,810, could suggest further downside move and a retest of the 50-DAY SMA at 12,680.00. The latter provides an extremely strong support to GER30 the last 2 months.

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