EUR/USD clings to gains with one eye on France's political crisis

• The Euro appreciates amid a softer US Dollar, but with upside attempts limited so far.
• Market concerns about political turmoil in France are weighing on the Euro.
• The US Dollar tumbled on Friday as US Nonfarm Payrolls data confirmed the labour market's deterioration.

The EUR/USD pair is ticking higher, trading near 1.1715 at the European session opening on Monday. The common currency is drawing support from a weak US Dollar after the poor US Nonfarm Payrolls (NFP) report seen on Friday, although a highly likely collapse of the French Government keeps Euro bulls in check.

NFP confirmed the deterioration of the US labour market, with its weakest growth since 2021 and a higher Unemployment Rate. The data practically confirmed market expectations of an interest rate cut at next week's Federal Reserve (Fed) meeting and brought the possibility of a 50 basis points cut back to the table. The US Dollar tumbled following the release.

The Euro, however, is seeing its own troubles on Monday, as France's Prime Minister Francoise Bayrou is facing a confidence vote, doomed to failure, later on the day. France's long-term yields are pulling back from last week's multi-year highs, but investors' concerns about political turmoil in the Euro area's second-largest economy pose a significant threat to the currency.

On the macroeconomic data front, German Industrial Production figures bounced up as expected, but the trade surplus narrowed beyond expectations. Later in the day, the Sentix Investor Confidence data will gather some attention. The highlight of the week, however, will be the European Central Bank's (ECB) monetary policy decision, due on Thursday.

Daily digest market movers: Hopes of Fed rate cuts keep the US Dollar under pressure

• US Nonfarm Payrolls showed a mere 22K increase in August, well below the 75K expected. July's data was revised to 79K from the previously estimated 73K, but June's reading was revised down to -13K, the first net loss in employment since the pandemic era. Furthermore, the Unemployment Rate ticked up to 4.3%. All in all, the sort of data that confirms a Fed rate cut next week.
• Futures markets are fully pricing an interest rate cut after the Fed meeting on September 16-17, with chances of a 50 basis points cut increasing to 8% from 0% before the NFP release, according to data by the CME Group's FedWatch tool.
• The negative impact on the US Dollar, however, is being offset by the political crises in Japan and in France, which are weighing heavily on the Japanese Yen and the Euro, respectively.
• French Prime Minister Francoise Bayrou is facing a confidence vote on a set of harsh cuts on public spending, which the main opposition parties have already rejected. This will leave one of the Euro area's leading economies in a standstill, and likely bring back eurosceptic rhetoric by right and left-wing parties, hurting confidence in the currency.
• In Monday's economic calendar, German Industrial Production bounced up 1.3% in July following a 0.1% contraction in June, in line with the market expectations. The impact of those figures, however, was offset by a narrower-than-expected trade surplus, at EUR 14.7 billion against market expectations of a EUR 15.4 billion figure. Both imports and exports fell unexpectedly in July, adding to the case of a weak economic outlook for the region's leading economy.

Technical Analysis: EUR/USD is at a key resistance in the 1.1740 area

EUR/USD is showing an improved technical picture. The 4-hour RSI is within bullish territory at 59, and so is the MACD, but the resistance area between 1.1720 and 1.1740 might be a tough nut to crack.

The pair is now testing the trendline resistance from July 1 highs at 1.1830. Above here, the 1.1740 area, which broadly encloses the highs of August 13 and 22, and September 1, is likely to challenge bulls ahead of Friday's 1.1560 high.

Immediate support is at the intraday low, right above the 1.1700 round number. Further down, the September 4 low, at the 1.1630 area, might cap downside attempts ahead of the zone between 1.1575 and 1.1590, which held bears on August 11, 22, and 27.