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How to trade German ZEW Economic Sentiment

The Germany 30 is trading in a short-term range, although with a slight negative bias ahead of the sentiment data release.

How to trade German ZEW Economic Sentiment

German ZEW Economic Sentiment data is an index derived from a survey of German institutional investors and analysts. An index reading above zero suggests positive economic sentiment, while a reading below zero suggests negative economic sentiment.

The data is released on the second or third week of every month and is considered a leading indicator of economic health. The data is expected to have a medium to high short-term impact on German financial markets.

Consensus estimates suggest that the latest German ZEW Economic Sentiment index will show a reading of ‘-38’. While this would imply market pessimism, it would be an improvement in sentiment highlighted from the previous reading of ‘-44.1’.

Markets are however more concerned about whether the data is better or worse than expectated. In turn a reading higher (less negative) than -38 could see a favourable short term market reaction, while a lower reading (more negative) than the expected -38, could see an unfavorable market reaction.

Trader might look to trading the Germany 30 index to capitalise on the reaction to the news scheduled for release imminently.

Germany 30: technical view

The hourly chart of the Germany 30 shows the 20-period simple moving average (SMA) to be trading below the 50SMA. This suggests a slight bias to the downside for the short to medium term. The index price is however trading in a near-term range between levels 12,325 (support) and 12,425 (resistance).

The slight bearish bias to the index, suggests that a worse than expected reading from the ZEW Sentiment data, could see traders position themselves for a move back to support at 12,325, using a close above the hourly high as a stop loss measure.

Alternatively, a better than expected ZEW Sentiment reading could see a move back to the 12,425-resistance level. In lieu of the negative lie of the 20SMA and 50SMA, it might be preferable to see a break above the 12,425 level before considering long positioning on the index.

IG client sentiment

At the time of writing (10am 17 September 2019), 69% of IG clients with open position on the Germany 30 expected the price to fall, while 31% of clients with open positions on the index expected to the price to rise.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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