EUR/USD price analysis: Recovery above 1.05 may stall

• The euro plunged in the previous session due to political unrest in France.

• The euro lost 3% of its value against the dollar in November.

• The US manufacturing purchasing managers’ index rose to 48.4 from 46.5.

EUR/USD price analysis shows some bullish momentum after a decline in the previous session. However, the fundamentals still point to 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 unrest in the euro zone’s second-largest economy. The French government is on the brink of collapse after major parties tabled a motion of no confidence in Prime Minister Michel Barnier.

This conflict arose after the Prime Minister’s budget proposed, among other things, punitive tax increases to repair the weak economy. A collapse of the French economy will be another reason for market participants to sell the euro.

Recently, economic data has shown a rapid contraction in the economy, increasing the likelihood of an interest rate cut by the ECB this month. At the same time, Trump’s trade proposals have raised fears of a further deterioration in the economy and weighed on the euro.

In November, the currency lost 3% of its value against the dollar, with experts predicting a fall to parity. Meanwhile, the dollar rebounded on Monday after data showed the U.S. manufacturing purchasing managers’ index rose to 48.4 from 46.5.

The optimistic report slightly reduced the likelihood of a Fed rate cut in December. However, the impact on the dollar faded on Tuesday as market focus shifted to more important data this week.

Economists expect the US unemployment rate to rise to 4.2%. Such an outcome will solidify the Fed’s rate cut bets in December and hurt the dollar. Meanwhile, the economy could add 195,000 new jobs in November.

Important events in EUR/USD today

EUR/USD Technical Price Analysis: Bears hit solid barrier at 1.0500

From a technical perspective, EUR/USD price has recovered and retested the 30-SMA resistance after breaking its decline near the key 1.0500 level. The trend changed when the bears took the lead and broke below the 30-SMA. If the price stays below the SMA, it could soon fall below 1.0500 and retest the 1.0301 support level.

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On the other hand, if the bulls regain control, the price is likely to rise and retest the 1.0700 resistance. At the same time, the RSI will break above 50.

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