EUR/USD, FTSE Forecast: Two trades to watch

EUR/USD falls amid French political uncertainty

French government is on the verge of collapse
Eurozone manufacturing PMI contracts further
USD rises as Trump threats trade tariffs
EUR/USD looks to test 1.05

EUR/USD is falling at the start of the week after strong gains last week as the US dollar rebounds and amid French political uncertainty.

France's far-right National Party has given Prime Minister Michel Barnier until today to accept the party's demands for concessions in the proposed Budget, which Barnier is attempting to push through the fragile coalition government.

Barnier is between a rock and a hard place. If he fails to give in, the RN threatens to call a vote of no confidence, which will almost certainly collapse the government. However, if he does give in, high spending will keep the country in an economically fragile position.

French borrowing costs have risen to the highest level against German borrowing costs since the 2012 crisis. The CAC is also falling sharply lower.

Meanwhile, eurozone manufacturing PMI data was confirmed at 45.2, deepening contraction in the sector. The downturn remains widespread, with manufacturing activity deteriorating across major economies, including Germany and France, which recorded the lowest readings.

Separately, the US dollar is rebounding on safe-haven flows after President Trump threatened BRICS countries with 100% trade tariffs should they threaten the USD's dominance.

Attention is also on the Federal Reserve ahead of a busy week for U.S. economic data, terminating with the nonfarm payroll report on Friday. The data comes as the Fed weighs up whether to cut rates this month after two consecutive rate reductions. The market is pricing in a 66% probability of a 25 basis point rate cut in December.

In addition to data, several Fed officials are due to speak this week, including Fed Chair Jerome Powell, on Wednesday.

EUR/USD forecast – technical analysis

EUR/USD rebounded from a low of 1.0330 but failed to retake the 1.06 or 1.07 levels necessary to negate the steep downtrend from 1.12 reached at the end of September. This, combined with the RSI below 50, keeps sellers in the driving seat.

Sellers will look to break below 1.05 to retest 1.0450, the 2023 low. A break below 1.0330 is needed to create a lower low.

Buyers need to retake 1.06 to have any chance of building a base higher.

FTSE inches higher after strong Chinese manufacturing data, but UK data disappoints

China’s manufacturing PMI rises to 51.5 & new orders soar
UK manufacturing PMI falls to 48 in November from 49.9
FTSE trades within a holding pattern

The FTSE is trading flat as investors weigh off encouraging Chinese manufacturing data, political instability in France, and disappointing UK manufacturing PMIs.

Data from China showed that manufacturing activity grew at the strongest pace in five months. The cakes in manufacturing PMI rose to 51.5 in November when I had a forecast of 50.5. Manufacturers' new orders are growing at the fastest pace in three years, suggesting that recent stimulus efforts are already seeping into the economy.

The good news is helping to lift miners, with Anglo American and Rio Tinto trading around 1% higher.

Meanwhile, the UK manufacturing PMI was slightly more disappointing, sinking to 48 in November, down from 49.9 in October, marking a nine-month low as new orders dry up. Headwinds from a rise in employment taxes following the New Labour government's budget, a 7% rise in the minimum wage, disruption to shipping in the Red Sea, and threats to global goods tariffs have created a challenging environment for manufacturers.

Also, keeping a lid on any gains or concerns over the political situation in France, where Barnier’s government holds on by a thread.

FTSE forecast - technical analysis

The FTSE continues to trade within a familiar range, capped on the upside by 8325 and 8150 on the lower side.

While the FTSE has recovered from the November low of 8000, rising above the 200 SMA and the 50 SMA, buyers will need to break out above 8325 to bring 8400 into target and 8480, the all-time high.

Immediate support is seen at 8230 the 50 SMA. Below here 8150 comes back into play, which is also the 50 SMA.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.