EUR/USD rises amid french turmoil, USD consolidation
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EUR/USD sustains above 1.0500 as French political instability and concerns about the Eurozone economy weigh on sentiment. While the pair consolidates, investors eye US Nonfarm Payrolls (NFP) data for insights into Federal Reserve policy, as the European Central Bank (ECB) gears up for a potential rate cut.
French Political Crisis Adds Pressure on the Euro
EUR/USD finds some relief above the 1.0500 level despite heightened political uncertainty in France. The no-confidence vote that ended Michel Barnier's brief tenure as Prime Minister has left France grappling with a deepening fiscal crisis. His proposed budget, criticized as "harmful" by opposition lawmakers, aimed to tackle France's widening deficit through €60 billion in tax hikes and spending cuts. However, political instability now clouds any hopes of swift fiscal reforms.
The Eurozone already faces multiple challenges, including weak demand and the threat of US tariffs under the incoming administration of President-elect Donald Trump. German Factory Orders added to the gloomy outlook, declining by 1.5% in October after a strong 7.2% rise in September, albeit better than the expected 2% contraction.
ECB President Christine Lagarde underscored the risks during her testimony before the Parliamentary Committee, emphasizing the "elevated geopolitical threats" and their impact on trade and growth. Traders now widely anticipate that the ECB will reduce its Deposit Facility Rate by 25 basis points to 3% at its December 12 meeting, a move that could weigh further on the Euro.
US Dollar Softens Ahead of NFP Data
The US Dollar Index (DXY) remains cautious near 106.00 as markets brace for the highly anticipated US Nonfarm Payrolls report on Friday. Economists expect the US economy to have added 200,000 jobs in November, a sharp rebound from October's hurricane-affected gain of 12,000.
The unemployment rate is projected to rise slightly to 4.2%, while wage growth data will provide additional clues on inflation pressures. Federal Reserve Chair Jerome Powell's recent remarks suggest a preference for a cautious approach to rate cuts, supported by strong economic fundamentals and steady inflation. According to the CME FedWatch Tool, markets assign a 77% probability of a 25 basis-point rate cut at the Fed's December meeting.
Technical Analysis: Key Levels to Watch
EUR/USD remains under pressure, consolidating near the psychological 1.0500 mark. While the short- and long-term Exponential Moving Averages (EMAs) point to a continued bearish trend, the 14-day Relative Strength Index (RSI) rebounding above 40.00 signals a potential pause in bearish momentum.
Support Levels: Immediate support lies at 1.0500. The November 22 low at 1.0330 represents a critical level for Euro bulls to defend.
Resistance Levels: The 50-day EMA near 1.0750 acts as a key barrier for upward moves. A break above this level could target the next resistance zone near 1.0800.
Outlook
EUR/USD is caught between opposing forces: the weight of Eurozone political and economic woes and the USD's muted performance ahead of critical US data. While downside risks persist, the pair's near-term trajectory will likely hinge on Friday's NFP results and upcoming central bank decisions. Traders should monitor geopolitical developments and key technical levels for actionable opportunities.
French Political Crisis Adds Pressure on the Euro
EUR/USD finds some relief above the 1.0500 level despite heightened political uncertainty in France. The no-confidence vote that ended Michel Barnier's brief tenure as Prime Minister has left France grappling with a deepening fiscal crisis. His proposed budget, criticized as "harmful" by opposition lawmakers, aimed to tackle France's widening deficit through €60 billion in tax hikes and spending cuts. However, political instability now clouds any hopes of swift fiscal reforms.
The Eurozone already faces multiple challenges, including weak demand and the threat of US tariffs under the incoming administration of President-elect Donald Trump. German Factory Orders added to the gloomy outlook, declining by 1.5% in October after a strong 7.2% rise in September, albeit better than the expected 2% contraction.
ECB President Christine Lagarde underscored the risks during her testimony before the Parliamentary Committee, emphasizing the "elevated geopolitical threats" and their impact on trade and growth. Traders now widely anticipate that the ECB will reduce its Deposit Facility Rate by 25 basis points to 3% at its December 12 meeting, a move that could weigh further on the Euro.
US Dollar Softens Ahead of NFP Data
The US Dollar Index (DXY) remains cautious near 106.00 as markets brace for the highly anticipated US Nonfarm Payrolls report on Friday. Economists expect the US economy to have added 200,000 jobs in November, a sharp rebound from October's hurricane-affected gain of 12,000.
The unemployment rate is projected to rise slightly to 4.2%, while wage growth data will provide additional clues on inflation pressures. Federal Reserve Chair Jerome Powell's recent remarks suggest a preference for a cautious approach to rate cuts, supported by strong economic fundamentals and steady inflation. According to the CME FedWatch Tool, markets assign a 77% probability of a 25 basis-point rate cut at the Fed's December meeting.
Technical Analysis: Key Levels to Watch
EUR/USD remains under pressure, consolidating near the psychological 1.0500 mark. While the short- and long-term Exponential Moving Averages (EMAs) point to a continued bearish trend, the 14-day Relative Strength Index (RSI) rebounding above 40.00 signals a potential pause in bearish momentum.
Support Levels: Immediate support lies at 1.0500. The November 22 low at 1.0330 represents a critical level for Euro bulls to defend.
Resistance Levels: The 50-day EMA near 1.0750 acts as a key barrier for upward moves. A break above this level could target the next resistance zone near 1.0800.
Outlook
EUR/USD is caught between opposing forces: the weight of Eurozone political and economic woes and the USD's muted performance ahead of critical US data. While downside risks persist, the pair's near-term trajectory will likely hinge on Friday's NFP results and upcoming central bank decisions. Traders should monitor geopolitical developments and key technical levels for actionable opportunities.