BUZZ-COMMENT-Downside risks grow for EUR/USD after tariff ructions

Feb 3 (Reuters) - EUR/USD struck a 27-month low Monday and a deeper fall is possible as tariff risks remain and economic divergence between the U.S. and euro zone persists.

January euro zone PMI showed signs of stabilization by coming in above estimate, but the results indicated the economic zone still remains in contractionary territory.

Meanwhile U.S. January manufacturing PMI indicated manufacturing is back in growth territory. The prices paid component came in above estimate while the employment gauge climbed into expansion territory with a reading of 50.3, up from 45.4.

Euro zone yields DE2YT=RR dropped on the data but were also negatively impact by U.S. President Donald Trump's tariff announcement and potential tariffs for Europe.

While Trump said Sunday the European Union could be next in line for tariffs.

Markets are likely to see Europe's heavily export-dependent economy vulnerable to tariffs.

Those influences significantly increased the dollar's yield advantage over the euro.

German-U.S. spreads hit their widest since mid December while terminal rate spreads for the Fed SRAM26 and ECB FEIZ5 blew out to -204bps.

Further spreads widening could drive EUR/USD towards parity.

In addition to those risks technicals highlight downside risks.

Daily and monthly RSIs imply downward momentum remains, EUR/USD is trading below a slew of falling daily moving averages and the recent break of the down trend line off the Sept. 30 high appears to have been false.

For more click on FXBUZ