EUR/USD dipped to retest the mid-June low at 1.0675 earlier after preliminary Eurozone PMI data reports reflected an unexpected softening in activity, Scotiabank’s Chief FX Strategist Shaun Osborne argues.

Spot may stabilize after quickly regaining 1.0750

“Focus fell on the French data, associating weakness with the French snap election, but German Manufacturing dropped two points to 43.4, instead of gaining one point as expected.”

“Preliminary Eurozone data for Manufacturing, Services and the Composite index were all weaker than expected but the Composite and Services readings held above 50 (52.6 and 50.8 respectively). French survey data reflected steady Business Confidence in June, meanwhile, but May Retail Sales plunged 1.4%.”

“Hefty losses over the latter part of the week leave the EUR testing key support again at 1.0675. Weakness below here leaves spot exposed to 1.06, or possibly lower. A strong, positive reaction to the upper 1.06s last week suggests the EUR may be able to stabilize but it needs to regain 1.0750 quickly in order to do that.”