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German ZEW preview: What to expect?

FXStreet (Mumbai) - The EUR/USD pair remains strongly bid and extends its struggle to regain 1.14 handle into a third day on Tuesday. The major received fresh impetus from the in line with estimates German final CPI figures (-0.2%) while a generalized worsening risk-sentiment after the mixed Chinese trade data, also supports the ongoing strength in the shared currency.

Attention now turns to the key risk event for the euro today – the German ZEW figures for October, which will be published at 09.00GMT.

German ZEW to reflect the Volkswagen scandal fallout

The ZEW will release its Economic Sentiment Index for the next six months for Germany, as well as the Current Situation Index, reflecting institutional investors' opinions of the current situation.

As per ZEW Economic sentiment is expected to drop sharply to 6.8 in October from 12.1 measured in September, while the Current Situation Index is also expected to trend down to 65.8 from 67.5 in the previous month.

The upcoming German data is expected to garner a lot of attention in wake of last month’s Volkswagen emission scandal. Hence, the sharp deterioration in the German investors’ sentiment wouldn’t be surprising at all.

Analysts at CMC Markets note, "Given the linkages to other areas of the German economy and the trickledown effect to the automakers supply chains, it wouldn’t be unexpected to see an even sharper decline given that as many as 1 in 6 German jobs depend on the automotive sector."

EUR/USD: Key levels to watch

The major is now testing the immediate resistance at 1.1400 (round number), beyond which 1.1442-60 (Sept 17 & 18 Highs) would act as a strong resistance zone. Should the data come in line with estimates, the price could halt its upbeat momentum and turn lower, with the immediate support in sight at 1.1363/ 1.1356 (hourly 50-SMA & 50-DMA), a breach of the last would expose 1.1300 (psychological levels).

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