The euro is rising and markets are applauding the possibility of a modern government being formed in France

The euro is clearly recovering ahead of Tuesday’s opening bell in the US.
Traders support the euro with the possible formation of a modern government on Wednesday.
US Nonfarm Payrolls will be published on Friday and JOLTS will be printed on Tuesday.

The euro is back above 1.05 in an attempt to recover, after losing 0.78% on Monday on concerns about the stability of the French government. French Prime Minister Michel Barnier, using a special decree, passed the reform of the social budget, bypassing the French parliament, which caused bad blood in the opposition parties, which quickly supported the vote of no confidence, which could take place earlier than Wednesday.

Meanwhile, in the US, Federal Reserve Governor Christopher Waller expressed his willingness to cut interest rates in December. This increased the likelihood of an interest rate cut, narrowing the rate differential between European and US bond yields. Therefore, there should be further weakening of the US dollar, which will give an additional impetus to the EUR/USD pair ahead of the US JOLTS job vacancies report, which will be published during the US session on Tuesday.

Daily summary of market players: Fresh policy always supports

The main economic event next Tuesday will be the US JOLTS job vacancies report for October. Job postings are expected to reach 7.48 million ahead of the retail-heavy holiday season, up from the previous 7.443 million.
Unemployment in Spain fell by around 16,000 people in November, following an augment in unemployment of 26,800 people recorded in the previous month.
Bloomberg confirms there will be a vote of no confidence in France on Wednesday.
European shares are rising despite hitting an intraday high, with Germany’s Dax hitting 20,000 points for the first time in history.
European Central Bank (ECB) board member Piero Cipollone said on Tuesday that Europe is growing much slower than it could and upcoming U.S. tariffs are likely to further reduce growth prospects. This opens the way to greater interest rate cuts by the ECB, Bloomberg reports.

Technical analysis: buy the rumor, sell the fact

EUR/USD has a long way to recover after its stellar correction in November. Given the policies of US President-elect Donald Trump, much may be at stake when it turns out that bold statements were a bargaining chip to reach an agreement or consensus.

The largest banks are already calling for parity, but it will not be surprising that parity will not be realized. There is a possibility that EUR/USD will return to 1.0600 and 1.0800 in the coming weeks as investors close out their positions ahead of the holiday season and the end of the year.

There are three robust resistance lines on the upside. The first is the previous 2024 low of 1.0601 recorded on April 16. If this level is broken, the June triple bottom at 1.0667 will be the next limit to the upside. Further up, the round 1.0800 level, which roughly aligns with the green uptrend line starting from the October 3, 2023 low, could trigger a acute rejection.

Looking for support, the next technical candidate is the 2023 low at 1.0448. The second level to pay attention to is the current two-year low at 1.0332. Below, the next levels to consider are 1.0294 and 1.0203.

EUR/USD: Daily chart