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EUR/USD TALKING POINTS
- ZEW Economic Sentiment Index (July) – ACT: 0-53.8
EURO FUNDAMENTAL BACKDROP
The initial euro reaction to the failure of the German and Eurozone ZEW Economic Sentiment Index (see economic calendar below) is expected to be negative, testing the much-discussed parity level. The EU region’s reading of -53.8 was the lowest since November 2011, reaffirming that optimism within the euro zone is waning. I believe that the 1.0000 psychological support area will not hold, and it is likely to be broken in the short term. Risks to further euro weakness include a potential energy crisis, an increasingly hawkish stance from the Federal Reserve and recession fears over safe-haven assets such as the dollar. Looking ahead, U.S. inflation will be the focus of tomorrow as markets seek further guidance on the U.S. economy.
Source: DailyFX economic calendar
TECHNICAL ANALYSIS
EUR/USD DAILY CHART
IG CLIENT SENTIMENT DATA: BEARISH
IGCS shows that retail traders are currently long EUR/USD, with 74% of traders currently holding long positions (at the time of writing). At DailyFX, we generally take a contrarian view of crowd sentiment, resulting in a short-term downside bias.
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