German ZEW preview: What to expect of EUR/USD?

The EUR/USD pair remained well supported around 1.1200 handle, although easing off a bit from day's peak of 1.1227, ahead of the German ZEW economic sentiment index, which is the immediate key driver for the EUR/USD pair's move during European trading session.

German ZEW sentiment to improve further in May

In a short while from now, the Zentrum fur Europaische Wirtschaftsforschung (ZEW) is scheduled to release the German ZEW economic sentiment for the month of May, that reflects the German economic outlook over the next 6-month based on the surveyed German institutional investors and analysts.

The sentiment index, after scaling to its highest level since Dec. 2015, is expected to climb further in May and come-in at 12.1 as compared to 11.2 recorded in April. Meanwhile, the current situation indicator is seen at 49 for May, up from 47.7 n April.

The ongoing slowdown in China has recently hurt the German export industry but the latest flash version of the PMI print pointed to improving business activity in Germany. Hence, today's update of German sentiment would help investors to assess the macro profile of the Euro-zone biggest economy in May.

A strong up-tick would assist the pair to register some near-term recovery from 1.1200 handle. However, given the looming concerns of a June Fed rate-hike, any further up-move, except for an immediate bullish spike, seems unlikely in the near-term. Meanwhile, a disappointing reading would now act as the fundamental trigger to assist the pair to break through 1.1200 handle support and extend its downward trajectory in the near-term.

Technical levels to watch

The 1.1200 handle remains important pivot point for the pair move after the release of ZEW economic sentiment. Below 1.1200 handle, the pair could immediately drop to test 100-day SMA support near 1.1160 level and the downward momentum could further get extended towards a medium term ascending trend-channel support near 1.1100 round figure mark.

Conversely, the pair needs to build on to its momentum above 1.1220 and extend it beyond 1.1240-50 horizontal resistance to increase the prospects of a further up-move. Beyond 1.1240-50 resistance, the pair seems all set to reclaim 1.1300 round figure mark, which if conquered has the potential to continue boosting the pair further towards its next major resistance near 1.1400 handle in the near-term.