EUR/USD Retests the 20 SMA, After the Softer Economic Sentiment in Europe - Forex News by FX Leaders
Economic sentiment weakens further in Germany and Europe

EUR/USD Retests the 20 SMA, After the Softer Economic Sentiment in Europe

Posted Tuesday, September 7, 2021 by
Skerdian Meta • 2 min read

EUR/USD has been on a bearish trend throughout summer, declining from around the 1.2260s to 1.1660s. But, since late August, this pair has reversed higher, as the FED’s Jerome Powell has been playing down the prospects of a rate hike soon, despite inflation remaining at 20-year highs, above 5%. That has turned the USD softer again, sending the EUR/USD higher, above 1.19, yesterday. But, we saw a retreat to the 20 SMA (gray) on the H4 chart, which we decided to buy.

But, the economic data from Europe is not helping our cause much. The ZEW economic sentiment cooled off further in Germany and the Eurozone in August, amid an increase in COVID rhetoric, which obviously hurts the sentiment. EUR/USD is trading close to the 20 SMA, so we’ll see if there is a bounce from this indicator, as we have seen during the last 2-3 weeks.

The 20 SMA continues to act as support for EUR/USD

German ZEW Economic Sentiment – September 7, 2021

  • September ZEW survey current conditions 31.9 points vs 34.0 expected
  • August  current conditions 29.3 points
  • ZEW Outlook 26.5 points vs 30.0 expected
  • August outlook was 40.4 points

While there is an improvement compared to current conditions, the continued fall in the outlook is perhaps the more pertinent signal for economic sentiment at the moment. It reaffirms waning confidence as the summer ends, and confirms that growth expectations have peaked.

Amid concerns surrounding the Delta variant and supply chain disruptions, the fear now is that the anticipated slowdown in Q4 will be more severe than expected.

Eurozone ZEW Economic Sentiment – September 7, 2021

  • ZEW Outlook 31.1 points vs 35.3 expected
  • August outlook was 42.7 points

Eurozone GDP Report by Eurostat – September 7, 2021

  • Q2 final GDP +2.2% vs +2.0% second estimate
  • GDP YoY +14.3% vs +13.6% second estimate
A slight bump in the final readings, but nothing to add to the modest rebound in Q2, when virus restrictions were eased.
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