- The Euro strengthens ahead of the US opening bell on Tuesday.
- Market sentiment is buoyed by the potential formation of a new French government as early as Wednesday.
- Traders are also eyeing the US Nonfarm Payrolls report on Friday, with JOLTS data being released on Tuesday.
The Euro makes a recovery, rising above 1.05 after falling 0.78% on Monday due to concerns about the stability of the French government. French Prime Minister Michel Barnier's use of a special decree to bypass parliament and pass his social budget reform has sparked opposition, leading to a potential vote of no confidence as early as Wednesday.
In the US, Federal Reserve Governor Christopher Waller expressed support for a December interest-rate cut, boosting expectations for the move and narrowing the bond yield differential between the US and Europe. This has likely contributed to a weaker US Dollar, further supporting the EUR/USD pair ahead of the US JOLTS Job Openings report to be released in Tuesday’s session.
Daily Market Movers: Fresh Politics Supportive
- The US JOLTS Jobs Openings report for October is the key event on Tuesday, with expectations for 7.48 million openings, slightly up from 7.443 million, as retailers prepare for the Christmas season.
- Spanish unemployment fell by around 16,000 in November, a notable improvement from the 26,800 increase seen in October.
- Bloomberg reports that a vote of no confidence will occur in France on Wednesday.
- European equities remain positive, although off their intraday highs, with the German DAX hitting 20,000 points for the first time.
- European Central Bank (ECB) Executive Board member Piero Cipollone warned that Europe’s growth is weaker than expected and could slow further due to potential US tariffs, suggesting larger rate cuts from the ECB.
Technical Analysis: Buy the Rumor, Sell the Fact
EUR/USD is on a long recovery path following its sharp correction in November. While market sentiment has priced in US policy shifts, many of the bold statements may turn out to be bargaining tactics, leading to potential reversals.
Although some major banks predict parity, it’s possible the EUR/USD pair could retrace back to levels between 1.0600 and 1.0800 as traders adjust their positions heading into the end of the year.
Key resistance levels to watch include the previous 2024 low at 1.0601 (April 16), the triple bottom at 1.0667 from June, and the 1.0800 round level, which aligns with the ascending trend line from October 3, 2023. On the downside, support can be found at the 2023 low of 1.0448 and the two-year low of 1.0332, with further support at 1.0294 and 1.0203.
