The struggles of the euro in the short term were exacerbated earlier today following the release of the massively disappointing industrial production numbers in the Euro Area's biggest economy. The single currency continues to tank against the greenback.
Germany's industrial production has sunk to its lowest level since the beginning of the pandemic in September. Economic activity in the biggest economy in the Eurozone continues to be stymied by persisting demand squeezes in the region and disruptions to the global supply chains. Deteriorating economic data has thus compounded, bolstering the selling pressure on the euro.
The EURUSD is establishing a massive new downtrend, as can be seen on the daily chart above. An attestation to its strength is the fact that the price action managed to break down below the 38.2 per cent Fibonacci retracement level at 1.16991 recently.
The significance of the latter is assured not only because it is one of the three crucial Fibonacci thresholds but also due to the level's close proximity to the psychologically significant turning point at 1.17000. Consequently, there is a very high probability that the downtrend would be extended lower towards the next critical support - the 61.8 per cent Fibonacci at 1.12949.
The strong bearish sentiment in the market is further illustrated by the fact that the price action remains concentrated below the perfect descending order of the four moving averages. The 20-day MA (in red) is positioned below the 50-day MA (in green), which is positioned below the 100-day MA, which is positioned below the 200-day MA (in orange).
Even still, the price action also appears to be developing a major Descending Wedge structure. This is a type of pattern that typically entails potential bullish rebounds. That is why on the condition that the price action manages to break out above the Wedge's upper limit and the 38.2 per cent Fibonacci, a new bullish trend may emerge afterwards.
Germany's industrial production faltered by 4.0 per cent in September, way below the preliminary forecasts of a much more moderate contraction of 0.4 per cent. The sharp downturn follows a material increase in industrial production by 1.3 per cent from a month prior.
The sharp dive in industrial production coincides with an analogous crunch in Germany's factory activity over the same period.