The EUR/USD currency pair is experiencing slight downward pressure at the start of a new week, having peaked at 1.0569 before crossing below the significant 1.0500 threshold. The EURO ’s decline is largely attributed to political instability in France, where rising tensions surrounding the budget bill could potentially lead to the collapse of the current minority government led by Marine Le Pen. As a result, investor sentiment has turned cautious, contributing to weaker equity markets and increasing yields.
Further complicating matters, geopolitical tensions have surfaced between Russia and the United States, particularly concerning trade policies under the new administration. Potential tariffs on BRICS nations proposed by the incoming U.S. president have elicited a stern warning from Moscow, indicating possible repercussions for such measures, which are interpreted as attempts to impose the dominance of the U.S. dollar.
On the data front, the Hamburg Commercial Bank’s final report for November’s Manufacturing Purchasing Managers Index (PMI) revealed that most major European economies registered downward revisions. The confirmed EU Manufacturing PMI stood at 45.2. Eyes will now turn to the U.S. manufacturing sector, with S&P Global’s figures set to be released, alongside an anticipated ISM Manufacturing PMI of 47.5 — slightly improving from the previous reading of 46.5.
From a technical analysis perspective, the short-term outlook for EUR/USD is bearish. Recent technical indicators have turned negative, displaying a robust selling interest, while the shorter 20 Simple Moving Average (SMA) continues to act as dynamic resistance. Should the price breach the support level at 1.0465, the potential exists for a further decline, targeting the 1.0420 area, with the year’s low at 1.0332 being the next significant marker to watch. Support and resistance levels have been established at 1.0465, 1.0420, and 1.0370, contrasted against resistance at 1.0540, 1.0585, and 1.0625.
