The drop in the euro today comes as traders are also pulling back on odds of a 25 bps rate hike by the ECB next month. That has been trimmed to ~51% now from around ~65% before the PMI data. In turn, this is all weighing on the euro with EUR/USD now nudging towards key technical support as outlined here earlier.

The 1.0800 mark and the 200-day moving average (blue line) at 1.0797 are the key levels to watch at the moment. Keep in mind as well that there are large option expiries at 1.0800 for the pair as seen here. So, there is some interest in keeping price action thereabouts for now.

But once the expiries roll off and we get to US trading, we could see sellers try to make a play I reckon. In any case, if the move comes before that, it will be a slippery slope for the euro.

There isn’t much support after on a firm break with the May low only coming in at 1.0635 next.

This article was written by Justin Low at www.forexlive.com.