Germany Christmas Market. Image source: Raúl Alejandro Rodríguez, flickr.com
Not even the better-than-expected economic sentiment numbers in Germany, the biggest economy in the Eurozone, were enough to cushion the euro's depreciation in the short term. You can read more about it from our comprehensive analysis of the EURUSD pair.
According to ZEW's latest report, the economic sentiment in Germany weakened in December, though significantly less than expected by the market forecasts. However, this was not enough to offset the euro's plunge in the short term.
EURUSD 2H Price Chart. Image source: Trendsharks ©, created with TradingView.com
As can be seen on the 2H chart above, the EURUSD is currently probing the 61.8 per cent Fibonacci retracement level at 1.43148. If the price action manages to break down below this last Fibonacci threshold, it would then likely head towards the previous swing low at 1.41700.
The new downtrend commenced following the completion of a major Ascending Wedge, which is a type of pattern that signifies such trend reversals. An attestation of the strong bearish bias that prevails at present is the fact that the price action also managed to penetrate below the 200-day MA (in orange) and 300-day MA (in purple).
Additionally, the steadily declining histogram of the MACD indicator highlights the robust bearish momentum that continues to rise in the short term.
If, however, the price action manages to consolidate above the 61.8 per cent Fibonacci in the next several hours, this could potentially be followed by a rebound to the 38.2 per cent Fibonacci at 1.44064. Nevertheless, this would be dependent on the behaviour of the price action around the two aforementioned moving averages.
The 200-day MA is currently at 1.43400, while the 300-day MA can be found at 1.43600. These two support-turned-resistance levels represent major obstacles for such a potential bullish rebound.
Germany's economic sentiment remains subdued
Germany MoM Economic Sentiment. Image source: TradingEconomics.com
The index fell to 29.9 points in December following the upward revision of 31.7 index points that was recorded a month prior. The contraction was much smaller than the initial forecasts of a drop to 25.3 index points, given that German consumption remained subdued over the same period.
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