Euro recovers above 1.0500 against US Dollar after plunging due to French political turmoil

• The Euro bounces slightly against the US Dollar after the sharp correction registered on Monday. 
• Traders assess the impact of the French political turmoil after a headline-filled trading day.
• Markets are looking ahead to the final US Nonfarm Payrolls data due on Friday. 

The Euro recovers firmly above 1.0500 against the US Dollar on Tuesday after losing 0.78% on Monday due to doubts over the stability of the French government. French Prime Minister Michel Barnier used a special decree to pass his social budget reform by circumventing the French parliament, a move that set off bad blood with the opposition parties, which were very quick to support a vote of no confidence that could be held as early as Wednesday. 

Meanwhile in the US, Federal Reserve Governor Christopher Waller said that he is keen for a December interest-rate cut. This has pushed up the odds for that rate cut to take place, narrowing the rate differential between European and US bond yields. Some further easing from the US Dollar should materialize on the back of this, giving further impulse to the EUR/USD pair ahead of the US JOLTS Job Openings report to be published in Tuesday’s American session. 

Daily digest market movers: Euro pares back losses 

• The main economic event this Tuesday will be the US JOLTS Jobs Openings report for October. Expectations are for 7.48 million job openings against the previous 7.443 million, ahead of the retail-intensive Christmas Holiday period.
• Spanish Unemployment in November fell by around 16,000 people, coming from the 26,800 uptick in joblessness seen the previous month. 
• European equities are rallying, with the German Dax hitting 20,000 points for the first time ever. 
• European Central Bank (ECB) Executive Board member Piero Cipollone said on Tuesday that Europe is growing much less than it could, with upcoming US tariffs possibly lowering the growth outlook even more. This opens the door for larger rate cuts from the ECB, Bloomberg reports. 

Technical Analysis: EUR/USD to put up a fight 

EUR/USD has a long road to recover after its stellar correction in November. With policies from US President-elect Donald Trump being priced in, a lot could be priced out once it turns out that bold statements were a bargaining chip to get some deal or consensus done. 

Major banks are already calling for parity, but it would not come as a surprise that parity does not materialize. There is the possibility that the EUR/USD pair reverts back to 1.0600 and 1.0800 in the coming weeks as traders unwind positions ahead of the Christmas season and the end of the year. 

On the upside, three firm lines of resistance can be seen. The first is the previous 2024 low at 1.0601 registered on April 16. If that level breaks, the triple bottom from June at 1.0667 will be the next cap upwards. Further up, the 1.0800 round level, which roughly coincides with the green ascending trend line from the low of October 3, 2023, could deliver a harsh rejection. 

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

EUR/USD: Daily Chart