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The Euro to Dollar exchange rate could benefit from returning investor appetite amidst signs that the worst of the Eurozone's economic downturn might have passed and China's growth prospects are improving.

Peak pessimism on the Eurozone could come alongside peak optimism on the ability of the U.S. economy to outperform, which adds another source of potential support to the EUR/USD, according to one analyst we follow.

"We are observing some tentative return of appetite for long euro positions in the market, despite lingering evidence of U.S. activity strength," says Francesco Pesole, FX Strategist at ING Bank.

A potential turning point in the Eurozone data pulse comes courtesy of better-than-expected business confidence numbers from Germany, where the ZEW survey index beat expectations with a print of -1.1, a significant beat of the -9.3 that was expected and a recovery on September's -11.4.

"The assessment of the economic situation in Germany has stabilised," said the ZEW.

The "figures might have fuelled a narrative that we have already touched peak pessimism in the eurozone, similar to what we are observing with Chinese sentiment. By contrast, markets might start to think optimism on the U.S. growth story is also close to the peak and are anticipating a rotation back into EUR/USD," says Pesole.

The Euro-Dollar exchange rate has fallen some 6.0% since July's highs but has stabilised above 1.05 during the course of October. The question asked by FX watchers is whether this stability is a pause in the trend or a base.

"We still deem a sustainable EUR/USD rally premature, given the strong (and growing) USD rate advantage. Improvements in the eurozone growth narrative would help, but a weakening in US data remains the key to unlocking major upside room for the pair," says Pesole.

The Euro's stabilisation comes alongside expectations that China has also seen negative expectations form a base, which is supportive of the Euro owing to the strong trading relationships between the two economies.

"With Chinese data helping today, we could see some support above 1.0600 coming today. The volatile situation in the Middle East remains a big question mark on the direction for the pair in the short-term though," says Pesole.

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China said Wednesday that GDP expanded by 4.9% in the year to the third quarter, exceeding estimates of 4.4%.

This represents a slowdown on Q2's 6.3%, but as always, when it comes to currencies, it is how the incoming data matches up against expectations.

Chinese industrial production expanded 4.5% in the year to September, which was better than the 4.3% expected and in line with the previous month's release.