The German ZEW sentiment index data came in better than expected adding to the euro risk-on sentiment as investor morale rises on vaccine news and rollouts. The ZEW sentiment index rose 9.4 points to 71.2 beating the expected 59.6 reading. It should be noted that the Eurozone Q4 GDP shrank for 2020 amid lockdowns and economic restrictions but the fall was less than predicted. Traders now look to how well countries like Israel and the UK are doing with their vaccinations and the optimism around their economies being able to open up, and see that the Eurozone should be starting off from a better level than previously thought. EU GDP growth rate for Q3 was up 12.4% so we could see a big rise again assuming the vaccination progress is positive.
Eurozone employment is rising faster than market expectations and we have seen all of the positive data today translate to a bullish move in the euro crosses. EURUSD has risen 0.32% in the London session and on the daily time frame has started taking out swing high resistance levels. 1.22000 could be the target for where the bears try and take back control but with continued US dollar depreciation a break and close higher of 1.22000 in the EURUSD could open up the highs from the opening trades in 2021.
The GBP took a hit as the EURGBP found buyers willing to step in on the European data and off the support zone created back in May 2020. The significant low of 30th April 2020 Is 40 pips away and I am considering it as a significant low that EURGBP could test on further upbeat data from the UK. But if EURGBP closes above yesterday’s high and starts trading within the range from the 4th February, we would have to consider the prospect of testing 0.88000 again before we look for more selling pressure to resume.
The pounds bearish sentiment today has also been reflected in the GBPAUD which finds itself not being able to break out of the range created from last Thursday’s price action. As I stated in the earlier commentary today following on from the Australian dollars Risk-On moves, GBPAUD was trying its hardest to buck the trend seen in EURAUD too but could now be on course to join in with a continuation of a larger downtrend as the Aussie gain’s strength based on the global reflation theme.
As the US traders step up, the AUDUSD could go on to test the highs from the 6th January 2021 around the 0.7820 level as the US dollar index is looking considerably weaker today having fallen out of the range from the last few trading days which was preceded by a very bearish momentum candle. 89.00 remains a bearish target with 89.50 possibly the last line in the sand for US dollar bulls to take back control near term.