Disappointing German ZEW economic expectations on Tuesday caused the EUR/USD to plunge for the 8th day in a row. German ZEW economic sentiment fell from 63.3 to 40.4, while Eurozone economic sentiment index also fell from 61.2 to 42.7.
The ZEW firm warns that a possible 4th coronavirus wave from autumn or a slowdown in growth from China pose significant risks for the German economy.
The result was the third straight monthly drop and marks a multi-month low. The single currency was hit hard and buckled under the pressure from a greenback already carrying significant tailwinds from last Friday’s NFP and the hawkish comments from several Fed members about early tapering.
The EUR/USD is down 0.16% on the day.
Technical Outlook for EUR/USD
The breakout from the falling wedge was rejected at 1.18927, opening the door for the 8-day drop in the EUR/USD. This drop is now heading towards the support at 1.17036. A breakdown of this level opens the pathway for 1.16028 to come into view, with the 23 September/29 October 2020 lows at 1.16527 forming an intervening barrier.
On the flip side, a bounce on 1.17036 allows for a brief recovery that targets 1.17505. At that level, a resumption pursues the previous support targets. A break above this level opens the door towards 1.18008, with 1.18395 and 1.18927 as additional barriers.