France faces ‘moment of truth’

Prime Minister Michel Barnier has warned that France has reached its “moment of truth”, as far-right leader Marine Le Pen is poised to join a left-wing coalition in an effort to topple his government, possibly as soon as this week.

On Monday, both Le Pen’s National Rally and a leftist alliance filed motions to initiate no-confidence votes against Barnier’s administration. Unfortunately for Barnier, the parties that support him lack the numbers to counter the combined efforts of these two groups, which means the government could fall as early as Wednesday.

The National Rally became the largest single party in the lower house of parliament following a snap election in June, elevating Le Pen to become Paris’s most influential power broker. Despite Barnier’s concessions to meet nearly all of Le Pen’s demands regarding France’s 2025 budget, she has stated that her party will still not support the bill, thereby setting the stage for a potential government collapse.

US data ahead

Traders are preparing for a significant release of U.S. economic data and comments from Federal Reserve officials that will influence the outlook for interest rates. Noteworthy events include the payroll report scheduled for Friday, which is expected to show a substantial increase in hiring for November, as well as Federal Reserve Chair Jerome Powell’s participation in a moderated discussion on Wednesday.

Fed Governor Christopher Waller expressed that he is inclined to vote for a rate cut in December; however, upcoming data may support the case for maintaining the current rates. The swaps market is currently predicting over a 70% chance of a quarter-point interest rate cut this month.

DXY bracing for key data

The US Dollar Index rally has stalled after failing to break above 107.30 and to escape its two-year trading range, declining towards 106. At the same time, technical indicators are moving away from overbought conditions.

This week’s data, particularly the US jobs report due on Friday, will be crucial. For now, further declines in the index are more likely ahead of this data release. If the jobs report is weaker than expected, it could result in a deeper decline in the DXY, potentially falling below 106.0 in the coming days.

EURUSD holding above 1.05

Since mid-November, the EURUSD has consistently traded above the 1.05 level while remaining in a tight range. Technical indicators are gradually moving away from oversold conditions and showing signs of improvement. The Euro is currently under pressure due to political uncertainty in France. However, since it is still within its two-year trading range, this could create opportunities for speculators to push the pair higher, potentially reaching 1.06 and 1.0660 in the coming days, especially if U.S. economic data comes in weaker than expected.

Aussie holding above 0.65

The Australian dollar has maintained its position above 0.65 since mid-November, displaying a similar trend to the Euro. It has been trading within a tight range during this period. However, technical indicators have been gradually improving over the past few days, suggesting a potential upward movement in the coming days. This stabilization above 0.65 could open the door for further gains, with the next targets being 0.6535 and then 0.6580.

Oil awaits OPEC+ decision

Crude oil prices have been trading within a narrow range for the past six sessions as investors await the OPEC+ decision. Reports indicate that OPEC+ may delay its production increase for a few more months. Meanwhile, Brent crude has shown strong support, holding above the solid support level between $71.50 and $72. This could set the stage for another upward move towards $73.00 and potentially $74.00 in the coming days. Traders should also keep an eye on the geopolitical tensions in the Middle East and Ukraine, which have contributed to recent price declines following the ceasefire deal in Lebanon.

Silver holding above $30

Silver has closed above $30 for three consecutive months, a feat not seen since 2011. This consistent performance indicates a monthly breakout that could lead to a significant rally in the coming months. Technical indicators are gradually improving. The next resistance level is around $31. If silver breaks above this resistance, it may open the door for further gains towards $31.40, followed by $31.70.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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