The EUR/USD currency pair is currently trading in a narrow range near the critical 1.0500 level as of early Tuesday. Persistent political instability in France, combined with contrasting monetary policy expectations from the Federal Reserve and the European Central Bank, is hindering the pair’s potential for upward movement. The 1.0520 resistance level remains a focal point for technical sellers, who could be drawn into the market if this barrier remains intact.
The beginning of the week saw EUR/USD start on a bearish path, dipping below 1.0500 on Monday. Despite recent efforts to stabilize, the pair has not shown any indications of a robust recovery. A risk-averse market environment has led to increased strength in the US Dollar, negatively impacting the EURO amidst rising political tensions in France. Reports suggest that the French government faces a likely collapse this week due to no-confidence motions filed by both far-right and left-wing parties against Prime Minister Michel Barnier.
Additionally, the divergence in monetary policies between the Federal Reserve and the European Central Bank is contributing to the lack of momentum for EUR/USD . The Atlanta Fed President has expressed uncertainty regarding the necessity of a rate cut in December, while another key Federal Reserve official noted that they are closely monitoring economic data before making any decisions. Conversely, an ECB policymaker has indicated confidence that the current inflation challenges will soon resolve, advocating for ongoing rate cuts.
Investor attention will shift in the afternoon with the release of the US Bureau of Labor Statistics’ JOLTS Job Openings data for October. Should the figures reveal a significant negative surprise, particularly a reading at or below 7 million, the US Dollar may experience downward pressure, potentially allowing EUR/USD to gain some traction.
From a technical analysis perspective, EUR/USD has fallen below the 1.0520 level, which is significant due to its alignment with the Fibonacci 23.6% retracement level of the recent downtrend. If this resistance is breached, the next key level to watch for will be at 1.0545, representing the 100-period Simple Moving Average on the 4-hour chart, followed by the 1.0600 area at the 38.2% retracement level. Support levels are currently identified at 1.0440 and 1.0400.
