Europe Expected to Drift Lower As Reopening Optimism Fades

Reopening optimism is showing signs of fading with European stocks pointing to a lower open following each day of strong gains
Reopening optimism is showing signs of fading with European stocks pointing to a lower open following each day of strong gains. an equivalent stubborn optimism that saw Asian stocks sneak up to 4-month highs overnight isn't being felt here in Europe. A quiet economic calendar will leave risk sentiment within the driving seat. However, the mixed performance of risk catalysts is confusing investors.


Whilst Boris Johnson announced the easing of more lockdown restrictions as from 4th July, the reduction of the 2-meter rule to 1 meter is unnerving investors following harsh criticism from scientists. Reducing that distance just by one meter increases the probabilities of getting the infection 10-fold, making localised flare ups and a second wave increasingly more likely.
Coronavirus news has been faraway from good on a worldwide scale. Several states within the US still see record daily rises, whist the price is South America has topped 100,000. Yet investors assume that there's alittle chance of a second lockdown on the size of what we've just experienced.

PMI data pointed to resilience in economies
Data within the previous session has show that economies across Europe are particularly resilient with commercial activity learning across the board. PMI data for the united kingdom showed that the contraction in commission sector and manufacturing activity slowed because the sectors continued to rebound from the April nadir. France, outperformed showing that the easing of lockdown measures had resulted in commercial activity quickly returning to expansion.

German IFO business sentiment data focused 
The economic calendar in Europe is quiet today. German IFO business sentiment for June is under the spotlight. Optimism is seen recovering further this month to 85, fromb79.5 in May. The assessment of the present situation is additionally seen improving from 78.9 to 84. The market mood could suffer a setback should the figures disappoint. a robust reading could see EUR/USD test resistance at $1.1422.
Oil extends slide, EIA data focused 
Oil is extending losses from the previous session after US crude stockpiles grew by quite expected, fuelling concerns over oversupply. Crude inventories rose by a bigger 1.7 million barrels last week, consistent with the American Institute of Petroleum, significantly before the 300,000-build forecast. EIA data are going to be keenly awaited today. 
Oil has had an honest run, rallying over 4% in only 3 days before yesterday’s data. the many integrate inventories was seen as an honest catalyst to book profits. On Tuesday oil had been trading at its highest level since prices collapsed in early March. 

 EUR/USD To Test Yearly Low?

EUR/USD has dropped through $1.1 its lowest level since late February amid a rush for the shelter dollar. 

German ZEW sentiment data caused an already panicked market to worry some more. The ZEW index, which gauged financial analyst’s sentiment and consider on an economic situation dived in March, recording the steepest drop on record.

The ZEW index fell to -49.5 in March from +8.7 in February and is now at its lowest level since December 2011. 

German recession
Germany is heading for a recession. things is fast paced . However yesterday Chancellor Angela Merkel announced a general lock down of Europe’s largest economy. All shops are to be closed, no touristic travel domestically or abroad, restaurants open until 6pm and no sports or cultural events allowed. So, consumption will drop dramatically. Large car manufacturers have also announced a short lived halt to production. the availability shock demand shock are going to be crippling and therefore the economic impact are going to be staggering. 
And the problem isn't just Germany, Italy, Spain and France, the most important economies within the eurozone all face severe pressure from the coronavirus outbreak, as governments lock down countries with already very fragile economies.

US retail sales miss
Meanwhile US data is additionally disappointing. Retail sales declined a -0.5% in February, missing expectations of 0.2% increase. These figures show that consumption, the most driver of the US economy had began to slow even before coronavirus social distancing measures were enforced, raising fears that the info out of the approaching months are going to be hideous.

Offshore Dollar Market Stress 
Despite the Fed’s best efforts to ease pressures within the money markets recent signals suggest that the moves haven’t worked. this is often presumably a results of lenders hoarding the dollar in expectation of increased liquidity needs from companies and growing concerns over bad loans. The pressure was most explicit within the euro/dollar 3-month FX spread which widened to 124 bps at one point, its widest level since the ecu debt crisis and up from just 20 bps earlier this month. this suggests that market player are willing to pay higher premiums for dollars, an amber alarm flashing.

EUR/USD hit a 14 month high on 9th March. Since then a correction has been is play which could see the pair retest the year low. Global turbulence within the financial markets and fears of a recession are seeing traders hunt down safe havens like the dollar and therefore the yen. 
Levels to observe 
EUR/USD is down over 1.5% at $1.10, it's picked up off session lows of US$1.0974. It trades below its 50, 100 and 200 sma and comfortably below the descending trendline.
Immediate support are often seen at $1.0974 (today’s low) before $1.0953 (low 28th Feb) and $1.0880 (low 26th Feb).
Resistance are often seen at $1.1026 (200 sma), $1.1118 (today’s high) and $1.1130 (100 sma). we might be trying to find a move above $1.1170 to negate on the present bearish trend on 4 hour chart.