Bearish pressure on the EURUSD is still substantial as economic data in the Eurozone worsens. Check out our last analysis of the pair to see just how low could the price action sink below the near multi-month low.
The ZEW economic sentiment index fell well below the market forecasts in August as German investor confidence sunk to its lowest level since November. According to the report's findings, the index tumbled to 40.4 points, down from July's 63.3 index points and the consensus forecasts of 54.9.
These findings in the largest economy in the Eurozone exacerbated EURUSD's short term woes as the greenback continues to strengthen against the weakened euro.
As can be seen on the 2H chart above, the price action behaves as per the expectations of the Wyckoff Cycle theory. Upon completing the transitionary Distribution range, the price action started Developing the newest Markdown.
It is worth pointing out that the preceding Markup took the form of an ascending 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory. Meanwhile, the current Markdown is concentrated within the boundaries of a Descending Channel.
Even still, a minor bullish pullback could emerge next before the broader Markdown can resume sinking lower. Such a pullback could extend to the 23.6 per cent Fibonacci retracement level at 1.17681 from below.
The latter bears significant psychological importance as a support-turned-resistance level.
The 23 index points drop is owing to reinvigorated fears of a fourth pandemic wave in Europe, which could stymie economic activity once again as governments are compelled to reintroduce more stringent containment measures.
German investor confidence sunk in August despite some promising factory numbers over the same period. Just two weeks ago, it was revealed that employment in the Euro area's manufacturing sector grew significantly as factories struggle to satisfy orders.
This, however, is owing to persisting supply bottlenecks resulting from the pandemic fallout, which would eventually subside. That is why German investors remain troubled by the prospects of diminished activity by the end of the year.