Germany – ZEW Economic Sentiment
At GMT 10:00 a.m., the Zentrum fur Europaische Wirtschaftsforschung (ZEW) released its German economic sentiment index, which measures the level of a diffusion index based on surveying 275 German institutional investors and market analysts.
Since the professional investment community, investors and analysts have the latest data; their reflection about the economy tends to be the most accurate. Therefore, market participants such as binary options traders consider the ZEW’s German economic sentiment index to be a leading indicator of the entire Eurozone economy. This is because the German economy is one the most important driving forces behind the Euro currency.
Last month, in October, the ZEW German economic sentiment came out at -3.6, and this month the forecast was set at a modest increase of 0.9. However, the actual figure came way better than what the market was expecting, at 11.5.
United States – Producer Price Index
At GMT 1:30 p.m., the US Department of Labor released the Producer Price Index (PPI) figure, which measures the changes in the price of products and services bought by manufacturers and service providers in the country.
Since the higher cost of production is usually passed on to the consumers, a rise in the producer price index indicates future inflation. Hence, this data is vital for binary option trading as it is used by economists as a leading indicator of the overall US economy.
Last month, the US month-over-month PPI decreased by 0.1%, indicating deflationary pressure on the economy. The forecast for this month was also set at a further 0.1% decline in the PPI. The actual figure, however, came out way better, at a 0.2% increase.
Trade Recommendation for the EUR/USD
The EUR/USD has been trending down since early May 2014. In recent weeks, the bearish momentum only accelerated. After testing the latest down trend line on October 21 and 29, the pair finally broke below the support zone around the 1.2500 level in early November.
After reaching the low of 1.2360 on November 7, the EUR/USD started to retrace towards the trend line. Today, amid better than expected German ZEW economic sentiment data, the EUR/USD finally touched the 38.2% retracement level of the previous downward move, at 1.2560. However, soon after the US PPI data came out, which was also better than expected, the Dollar bulls pushed the price of the EUR/USD lower. Currently, the EUR/USD is trading at 1.2498, just below the psychological big round number of 1.25.
Given the binary option market for the EUR/USD was bearish for last several months; it appears that good ZEW German economic sentiment data will not be sufficient to change the trend. In fact, there is a high probability that the EUR/USD will re-test the support around 1.2357 amid increased PPI in the United States over the course of the next few days. Hence, as far as binary options trading is concerned, it suggests a PUT in the EUR/USD.
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About our Forex Analyst: Asif Imtiaz
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