Hello Inchoate
I find the Cambridge definition very strange. But then, they are very strange in Cambridge (trust me).
My Oxford dictionary meanwhile defines "blue funk" as "cowering fear; a state of panic".
Apart from that, it looks fine – though I would probably use parentheses, rather than commas, i.e.
They are in a blue funk due to their country's national eleven going out to Italy in the semi-final. Their hopes of seeing Germany (who they have been rooting for throughout the championship) in the final have been dashed.
Some people might insist that you add an apostrophe-s to "national eleven" and change "who" to "whom"; but I think that would be inappropriate in a text of this kind.
MrP