- The euro plunged in the previous session due to political turmoil in France.
- The euro lost 3% of its value against the dollar in November.
- The US manufacturing PMI increased from 46.5 to 48.4.
The EUR/USD price analysis shows some bullish momentum after a slide in the previous session. However, fundamentals still suggest further downside for the pair. Meanwhile, the dollar gave up yesterday’s gains as traders awaited crucial data for clues on Fed rate cuts.
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The euro plunged in the previous session due to political turmoil in the Eurozone’s second-largest economy. France’s government is on the brink of collapse after major parties moved a motion of no confidence in Prime Minister Michel Barnier.
This conflict came after the PM’s budget revealed punitive tax increases, among other changes, to help repair the weak economy. A collapse in France’s economy will be one more reason for market participants to sell the euro.
Recently, economic data has shown a rapid decline in the economy, raising the likelihood of an ECB rate cut this month. At the same time, Trump’s trade proposals have raised fears of further deterioration in the economy, weighing on the euro.
In November, the currency lost 3% of its value against the dollar, with experts predicting a drop to parity. Meanwhile, the greenback rebounded on Monday after data showed that the US manufacturing PMI increased from 46.5 to 48.4.
The upbeat report slightly lowered the likelihood of a Fed rate cut in December. However, the effects on the dollar faded by Tuesday as the market focus shifted to more important data this week.
Economists expect an increase in the US unemployment rate to 4.2%. Such an outcome will solidify December Fed rate cut bets and hurt the dollar. Meanwhile, the economy might add 195,000 jobs in November.
EUR/USD key events today
EUR/USD technical price analysis: Bears meet solid barrier at 1.0500
On the technical side, the EUR/USD price has recovered to retest the 30-SMA resistance after pausing its decline near the 1.0500 key level. The bias shifted when bears took charge by breaking below the 30-SMA. If the price stays below the SMA, it might soon break below 1.0500 to retest the 1.0301 support level.
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On the other hand, if bulls take back control, the price will likely climb to retest the 1.0700 resistance. At the same time, the RSI will break above 50.
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