Euro, Davos, ZEW Survey – Talking Points
- Euro may rise if Davos forum outlook strikes optimistic tone
- Better-than-expected ZEW reports could amplify Euro gains
- Risk aversion in Asia may seep into European trading hours
Gold prices along with the haven-linked Japanese Yen rose at the expense of Asia-Pacific equities and S&P 500 futures after news broke that there is an outbreak of the coronavirus in China. Risk aversion permeated markets after the World Health Organization called an emergency meeting as Chinese travelers prepare to take flights abroad for the Lunar New Year.
Gold Prices, AUD/JPY, S&P 500 Futures – Daily Chart
Gold prices chart created using TradingView
European Session Preview
The Euro may rise if German ZEW survey data exceeds expectations and reinforces the notion that the fundamental outlook is showing signs of stabilization; and therefore, less of a need for ECB rate cuts. The Euro’s rise may be amplified by commentary from officials at the World Economic Forum in Davos, Switzerland, where business executives and world leaders will be meeting to discuss their outlook for 2020.
Today, the forum will open, and Bank of England Governor Mark Carney will be speaking which will likely cause the ears of British Pound traders to perk up. This comes as officials have contemplated the merits of “near-term stimulus” in the face of lackluster growth. Uncertainty relating to Brexit has also contributed to the slowdown in the UK and will likely be a topic Mr. Carney will discuss and its impact on monetary policy.
Markets will be closely watching for other commentary from officials and the general tone of the forum. Given the IMF’s recent World Economic Outlook, forecasts of a similar nature may push risk-oriented assets higher at the expense of haven-linked currencies like the US Dollar, Swiss Franc and Japanese Yen. A cautiously upbeat tone would fall in line with the recent trend in global stabilization and market buoyancy.
German ZEW Data May Amplify Market Buoyancy
German ZEW Current Situation figures are expected to show a -13.5 reading, far less severe than the prior -19.9 print, with the Expectations statistic forecasted to increase to 15.0, up from the previous 10.7 report. Since December, economic data from the Eurozone has been tending to outperform relative to economist’ expectations, so seeing upcoming German data fall in line with this trend may not be entirely surprising.
EUR/USD Technical Analysis
EUR/USD has retreated after failing to clear the former December uptrend and is now trading on the edge of the lower cusp of the 1.1091-1.1121 range (gold-dotted lines). A break below support with follow-through may open the door to retesting 1.1039, though fundamental catalysts ahead may be more supportive of an upside move.
EUR/USD – Daily Chart
EUR/USD chart created using TradingView
EURO TRADING RESOURCES
— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter