On Tuesday (December 3rd) in the Asian market, the EUR/USD fluctuated narrowly and is currently trading around 1.0495. The euro fell 0.75% against the US dollar on Monday, the largest single day drop since November 9th, as concerns about the possible collapse of the French government grew. A government collapse would halt plans to curb the surge in budget deficits.

At the same time, the US dollar continued to rise after the release of strong US manufacturing data by the Institute for Supply Management (ISM) and S&P Global. However, despite the generally positive data, Federal Reserve Governor Waller stated on Monday that he is inclined to lower the benchmark interest rate at the meeting on December 17-18 due to the still restrictive nature of monetary policy.

The US dollar rose 0.59% against a basket of currencies on Monday, and recorded its first weekly decline since November 2023 last Friday. On Tuesday in the Asian market, the US dollar index fluctuated narrowly and is currently trading around 106.43.

In Europe, investors demanded a jump in the risk premium of holding French debt rather than benchmark German debt. Earlier, Baldera, the president of the French far right National Union, said that unless there was a "miracle at the last moment", the party might support a no confidence motion in the next few days.

National Union leader Le Pen has demanded that French Prime Minister Barnier meet the party's budget requirements by Monday.

The euro fell 1% on Monday to $1.0469, with the decline narrowing after Federal Reserve officials made statements supporting a December rate cut.

Kyle Chapman, a foreign exchange market analyst at Ballinger Group, wrote in an email comment: "The collapse of political confidence in France and the once again higher than expected economic activity data in the United States have given the euro a bad start in December." Ballinger Group provides currency risk management and trading services.

As expected, the interim government is now facing a vote of no confidence and is likely to fail, and new elections will not be held until the summer, so there is no clear path to reducing the deficit in the short term“

The yield difference between French and German 10-year bonds (a measure of the premium investors require to hold French debt) rose 7.6 basis points to 87.3 basis points, reaching 90 basis points last week, the highest level since the euro zone sovereign debt crisis in 2012.

Monday's data once again showed the resilience of the US economy, with manufacturing activity improving in November, orders increasing for the first time in eight months, and factories facing a significant drop in input prices.

The Purchasing Managers' Index for Manufacturing by the American Institute for Supply Management rose to 48.4 last month and 46.5 in October, the lowest level since July 2023.

The final value of the S&P Global Manufacturing Purchasing Managers' Index also rose from the initial estimate of 48.8 to 49.7.

Juan Perez, the head of trading at Monex USA, said, "Due to the stable economic situation in the United States, it is reasonable for the US dollar to continue to rise in the face of more headwinds in economies across the ocean. (Positive data) will only increase US bond yields and even lower expectations for the Federal Reserve to implement loose monetary policy

However, Federal Reserve Governor Waller pointed out on Monday that "policy still has sufficient constraints, so we will not significantly change the stance of monetary policy by cutting interest rates again at the next meeting, and will leave enough room to slow down the pace of interest rate cuts in the future if needed

After Waller's comments, according to CME's FedWatch, the market raised the probability of a 25 basis point rate cut this month from 66% late last Friday to 79%. At the same time, the probability of interest rate futures suspending the Federal Reserve has decreased from 34% last Friday to 21%.

Due to US President elect Trump's demand for BRICS member countries to commit not to creating a new currency or supporting another currency, this marks a change in his previous stance of advocating for a weaker US dollar, which had risen earlier.

The Kremlin stated on Monday that any attempt by the United States to force countries to use the US dollar would be counterproductive.

The key to the interest rate outlook will be the November employment report released on Friday, with a median forecast showing an increase of 195000 jobs in November following reports of weather and strikes in October. The unemployment rate will rise from 4.1% to 4.2%.

Today's US data mainly focuses on JOLTS job vacancies, with speeches from Federal Reserve Governor Kugler and Chicago Fed Chairman Goolsby.

The technical chart of the US dollar index shows that the 5, 10, and 21 day moving averages conflict, and momentum research is declining. The 21 day Bollinger Bands are contracting - the daily chart signal is neutral. Wednesday's high of 106.92 and last week's high of 107.55 are the first resistance levels. Last Friday's low of 105.61 was initially supported by a 0.382% increase in October/November, with a retracement to 105.05.

If the yield falls below 105.00, the upward trend in October/November will end.

EUR/USD fundamentals and technical indicators suggest further decline

From a fundamental perspective, there is almost no reason to buy EUR/USD, and the technical side has also turned bearish

PMI shows a significant decline in factory activity in the Eurozone in November, with a bleak outlook. Volkswagen's nine factories are on strike, deepening the rift between workers and management.

On a technical level, the EUR/USD 21 day Bollinger Bands have contracted, and the daily chart momentum research shows a neutral trend. 5. On the 10th and 21st, the moving average reached its peak, and the weekly chart showed a decline in the moving average - a bearish pattern

The 21 day moving average of 1.0591 and the top of the recent range of 1.0610 are key resistance levels that should be held.

Last week's low of 1.0425 and November's low of 1.0331 are preliminary support levels.

1.0470 has $726 million and 1.0500 has $1.443 billion options expiring.

USD/JPY continues to fall and is about to break below the weekly cloud zone?

The US dollar against the Japanese yen rebounded 0.7% to 150.74 on Monday, but gave up its gains due to expectations of a Japanese interest rate hike, falling 0.37% to 149.07 and closing at 149.58. Last week, it fell 3.3%, the worst since July. On Tuesday in the Asian market, the US dollar fluctuated narrowly against the Japanese yen, currently trading around 149.73.

Last weekend, Bank of Japan Governor Kazuo Ueda stated that after Japan's inflation rate rose in October, "from the perspective of economic data getting on track, the next interest rate hike is approaching.

Today's exchange rate was between 149.50-92 during the Asian session, returning to the rising daily cloud zone of 146.73-149.62.

Is the weekly cloud zone 148.74-153.15 about to fall below? If so, increase the bearish signal.

It is interesting that the Japanese yen and the US dollar have generally strengthened, and both are now "safe havens". When the US dollar weakens, the Japanese yen may rise even more.

The narrowing of the US Japan interest rate differential continues to benefit the yen/dollar. The yield of US treasury bond bonds fell again, while that of Japanese government bonds remained firm.

There are a large number of options expiring near today, with $601 million at 148.25 and $850 million at 148.95-149.00.

At 151.80, there is still $660 million left, and if it falls below the strike price around 149.00, it may encounter a stop order.

Before the Tokyo fixed price today, the demand of Japanese importers has once again received attention. Speculators and Japanese exporters will seek opportunities to sell at high prices

GBP/USD remains stable with a neutral technical outlook, despite poor UK retail and PMI data

The GBP/USD remained stable after closing down 0.65% last day, while the GBP/USD fluctuated narrowly in the Asian market on Tuesday and is currently trading around 1.2648.

UK retailers report weak retail sales in November; The UK manufacturing PMI fell to a nine month low due to reduced orders and rising costs.

The daily momentum indicator is positive, with a contraction in the 21 day forest belt range. 5. The 10 and 21 day moving averages are intertwined, and the signal display technology pattern is neutral

The initial support is at last Wednesday's low of 1.2569, followed by the November trend low of 1.2475.

The resistance level is at the proven 21 day moving average of 1.2720, followed by a 0.382% retracement of 1.2841 from the September/November decline

If the closing price is outside the range of 1.2475/1.2841, it should indicate further direction for the future market.