EUR/USD set a course to test its 2018 low after dismal euro zone PMI data nL8N1X42E4, with focus turning to this week's ECB meeting as another potential catalyst. The EUR/USD selling ignored the tightening of German-U.S.
government yield spreads that should have favored the euro, as the pair broke below the 76.4 percent Fib of 1.1301-1.1815 and the 1.1410/30 support zone.
Bolstering the case for losses is the ongoing row over Italy's budget between Rome and Brussels.
The combination of below-forecast data and budget tensions raises the stakes for Draghi's presser after Thursday's ECB meeting.
Draghi may have to balance economic and Italian risks without appearing overly dovish.
Draghi and the governing council have been noting economic risks are broadly balanced. If markets interpret Draghi dovishly, interest rates across the euro zone are likely to slide, which should extend EUR/USD's fall and set up a test of the 2018 low.
A break of that low would bring into focus the 61.8 percent Fib of 1.0340-1.2256 at 1.1187 and the June 2017 EBS low at 1.1119.
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