EUR/USD plummets to monthly lows, below 1.1300 handle on dismal Euro-zone PMIs

   “¢   Disappointing EZ PMI prints prompt some aggressive selling.
   “¢   Investors scale back expectations for an ECB rate hike in 2019.
   “¢   A follow-through technical selling remains a distinct possibility.

The EUR/USD pair finally broke below the 1.1300 handle and tumbled to fresh monthly lows in a knee-jerk reaction to dismal Euro-zone PMI prints.

According to the flash readings, French PMIs drifted into contraction territory for the first time in over two-years and German manufacturing PMI dropped to 33-months in December. Adding to the disappointment, the composite Euro-zone PMI fell to a fresh 49-month low level of 51.3 in December.

Today’s data reaffirmed a dovish shift by the ECB President Mario Draghi during the post-meeting press conference on Thursday, forcing investors to scale back expectations for a rate hike next year, and prompted some aggressive selling around the shared currency.  

According to the Euro-zone money market futures, investors are now pricing in roughly 60% probability for the ECB to hike rates next year, which marks a heavy drop from around 75% probability seen yesterday after the ECB meeting.  

With today’s fall, the pair finally seems to have confirmed a near-term bearish breakdown and hence, a follow-through weakness, led by some fresh technical selling, remains a distinct possibility.

Technical levels to watch