EUR/USD extends correction after downbeat German and Eurozone data

• EUR/USD dips for a second day in a row after being rejected above 1.0400 this week. 
• German factory orders are sinking lower and could not have come at a worse time.
• Meanwhile, President-elect Donald Trump is ramping up geopolitical rhetoric on the global stage. 

The EUR/USD pair extends its correction and trades around 1.0320 at the time of writing on Wednesday after being rejected above 1.0400 earlier in the week. The pair erases most of the initial weekly gains after German factory orders data for November came out. The heavily industrialized core European country saw Factory Orders shrink by 5.4% in November, compared to a 1.5% decline in October. The data could not have come at a worse time, given the political campaigning ahead of the German snap elections on February 23.

Meanwhile, markets are on edge over President-elect Donald Trump, who is further shaking up the geopolitical scene. In a statement held at Mar-a-Lago on Tuesday, Trump reiterated his desire to incorporate Greenland, the Panama Canal, and Canada into the United States. Trump also mentioned again that he will address the US rates, which are too high at the moment and need to come down substantially, Bloomberg reports. 

Daily digest market movers: Red and Blood Red

• German Factory Orders sank in November, contracting by 5.4% on the month compared to the 0% expected. On a yearly basis, factory orders fell by 1.7%, compared to the rise of 5.7% last seen in October. 
• German Retail Sales decreased by 0.6% in November, missing the positive 0.5% expectation. At least the actual number is better than the -1.5% seen in October. 
• December’s French Consumer Confidence came in at 89, a touch lower than the 90 from November. 
• Eurozone Consumer Confidence for December remains unchanged at -14.5, while Industrial Confidence misses its estimate and falls to -14.1, lower than the -11.7 expected and below the revised -11.4 from November. 
• November Producer Price Index data for the Eurozone sees a 1.6% uptick against the previous 0.4% increase, and beating the 1.5% consensus view. 
• German Bunds ticked up further to hit a near-fresh six-month high of 2.517%, which is no longer far off from the 2.642% high seen in July last year. 
• European equities are mildly positive, beating the negative tone seen in Asia, where equities across the region are set to close in red numbers on Wednesday. 

Technical Analysis: EUR/USD back on track to 1.02

The EUR/USD revival at the beginning of this week looks dead and buried. With a firm correction during the US trading session on Tuesday, it looks like US Dollar (USD) bulls are dominating again. With the resurgence to 1.0440, a window of opportunity was offered for US Dollar bulls that had missed the earlier entry at the end of December. 

For the EUR/USD recovery to continue, the first big level to break is 1.0448, the low of October 3, 2023. Once through that level, the 55-day Simple Moving Average (SMA) at 1.0549 comes into play. Another catalyst will be needed for this kind of move, as it could squeeze the Dollar bulls. 

On the downside, ahead of the current two-year low of 1.0224, the 1.0294 level is now acting as the new first line of defence. It was a pivotal point on Monday, offering room for buyers in EUR/USD to get involved and push price action higher. Further down, the round level at 1.02 would mean a fresh two-year low. Breaking below that level would open up the room to head to parity, with 1.0100 as the last man standing before that magical 1.00 level. 

EUR/USD: Daily Chart