EUR/USD drops to 2-month lows near 1.1120 on poor PMIs

The selling bias around the single currency stays everything but unabated so far today, with EUR/USD recording fresh multi-week lows in the vicinity of 1.1120.

EUR/USD now looks to ECB, YTD lows

The pair gained extra downside momentum after advanced prints from manufacturing PMIs in core Euroland are expected to deteriorate further in July.

In fact, the French PMI came in at 50.0 (vs. 51.6 forecasted), the German gauge is seen dropping to 43.1 (vs. 45.1 previously estimated) and the flash print in the broader euro area is forecasted to drop to 46.4 (vs. 47.6 anticipated).

Further publications saw the M3 Money Supply in the region expanding at an annualized 4.5%, also coming in short of expectations.

In a context where the greenback keeps dominating the sentiment, spot is expected to remain under heavy pressure in the next hours ahead of the ECB event and amidst increasing bets of an announcement of looser monetary conditions in the region.

What to look for around EUR

Rising odds for fresh monetary easing by the ECB later in the week - in the form of interest rate cuts, the resumption of the QE programme and potential changes in the forward guidance - have been hurting the mood in EUR while keeping buyers at bay at the same time. The deep pullback in the pair now carries the potential to visit yearly lows in the 1.1100 area and probably below in case the ECB delivers tomorrow.

EUR/USD levels to watch

At the moment, the pair is retreating 0.10% at 1.1140 and faces immediate contention at 1.1116 (monthly low May 30) seconded by 1.1109 (low Apr.26) and finally 1.1106 (2019 low May 23). On the upside, a breakout of 1.1286 (high Jul.11) would target 1.1311 (200-day SMA) en route to 1.1412 (high Jun.25).