EUR/USD extends the drop near 1.1640 ahead of Eurozone PMIs

Sold-off into Germany’s political uncertainty and broad-based USD strength.
Eyes sentiment on the European stocks and PMI reports for some respite.

Dhwani Mehta FXStreet

The offered tone around the Euro is seen growing bigger in early Europe, knocking-off the EUR/USD pair below the midpoint of the 1.16 handle, as the European markets hit their desks and react negatively to the renewed tensions surrounding the German political climate.

Earlier today, the AFP news agency reported that the German Interior Minister Seehofer is seeking to resign from his position as well as his seat as the Head of Germany's Christian Social Union (CSU), Merkel’s Bavarian alliance, rejection the migration deal.

This news took the markets off guard and created a sense of panic, as investors remained wary over the German Chancellor Merkel’s future, sending the EUR off the cliff from just below the 1.17 handle.

The spot reversed more-than-half the rally seen on Friday, triggered by the reports that the European Council (EUCO) reached the all-important EU migration deal at the EU Summit.

Looking ahead, markets eagerly await the sentiment on the European markets for fresh impetus on the prices. However, it seems that the major could test the 1.1600 support, as the European equities will turn risk-off amid German political woes and oil-price weakness.

Calendar-wise, the Euro area final manufacturing PMI reports will be released 7.15 GMT onwards while the Eurozone PPI and jobless rate numbers will be also eyed ahead of the US ISM manufacturing PMI release.

EUR/USD Technical Levels:

Ross Burland, FXStreet’s Analyst, notes: “EUR/USD's broader range remains between 1.1500 and 1.1850. 1.1508-10 May-Jun lows have held protecting the1.1448/1186/0863 downside target areas as being the 2016-18 rising Fibo levels. The 200-week moving average is also located down at 1.1435 while 1.1186/1.0814 comes as the 61.8% and 78.6% retracements). On the upside, a break of 1.1855 opens 1.20/1.21.“

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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