German ZEW investor confidence jumped to 20.4 in January, from 17.4 in the previous month. A much stronger than expected reading, with the breakdown showing that investors expect further improvements in global stock markets. The reading for the U.K. FTSE 100 remains very low compared to readings for other major stock indices. While the ZEW is the most forward looking indicator for economic developments ahead, it is also the most unreliable, and at the moment, the question is whether it not also measures overconfidence among investors, as stock markets start to look increasingly overbought and concerns about overheating increases. For the ECB then the ZEW result adds to the arguments of the hawks at the central bank, but at the same time the over-exuberance on stock markets also adds to the arguments of the doves, who don’t want to move cautiously, also with view to possible overreactions on markets. The GER30 reached a new record high this morning ahead of the release and has pulled back slightly from intraday highs, but remains firmly above 135700.
Meanwhile, Euro is traded mixed, with Euro picking up on data against US Dollar, Canadian dollar and Pound, but remains weak against Yen, Swissy and NZ Dollar. EURUSD has continued to narrowly orbit the 1.2250 level, as it has been for over a week now. The pair lifted out of the intraday low at 1.2223, which was seen during early trading in London, after the Senate vote on the stopgap funding bill, which had limited positive impact on the dollar.
On the European data however, EURUSD lifted up to 1.2253, by breaking the 20 and 50-period MA in the hourly chart. However, the negative momentum seems to hold for now, since the hourly candle did not hold in the upper Bollinger BAnds pattern, but instead return back at the 1.2240 lows. Therefore only a strong hourly closing above 1.2253 (20-period MA), could signalled positive intra-day momentum, and hence a retest of 1.2275.
Otherwise, the negative momentum is likely to continue, and it is likely to see a retest of the immediate support at 1.2215-1.2209. Hourly momentum indicators are configurating negatively, with Stochastic at 35, RSI below 50 and MACD on neutral, pointing downwards. Next support for EURUSD is at 1.2182-84, while last Tuesday’s 37-month high is at 1.2323 remains in the scopes.
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