ING’s Francesco Pesole notes EUR/USD has held up with risk sentiment despite Gulf tensions, but warns current levels may not withstand an equity correction. He expects ZEW surveys to show further deterioration in German sentiment and maintains a bearish-leaning view on EUR/USD, arguing a break above 1.180 looks unsustainable while a retest of 1.170 is more likely.

ZEW weakness and fragile EUR/USD levels

"EUR/USD has continued to hold up well alongside risk sentiment despite growing pessimism about a resolution in the Gulf. But any meaningful equity correction would likely prove incompatible with current levels, even if ECB pricing remains more hawkish than the Fed’s."

"Today’s eurozone calendar includes the ZEW surveys, which will give a first glimpse of sentiment in Germany in May. Consensus is looking at a further deterioration in both the expectations and current situation indices."

"These surveys can be hard to interpret in such a geopolitically volatile environment, but the message should be one of (predictable) worsening in the eurozone’s growth outlook."

"Our view of EUR/USD remains bearish-leaning unless we start to see tangible steps towards a US-Iran peace deal. A break above 1.180 hardly looks sustainable in this environment, and a retest of 1.170 looks more likely if anything."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)