On December 3rd, the atmosphere in the Asian market was charged with uncertainty as the euro fluctuated within a tight range against the US dollar, currently trading around 1.0495. This development follows a significant 0.75% decline for the euro against the stronger dollar on the previous Monday, marking its largest single-day drop since November 9. Heightened concerns regarding the potential collapse of the French government exacerbated the euro's woes. A governmental downfall would threaten the continuity of plans aimed at curbing the alarming deficit growth that has been a point of contention and economic concern.Meanwhile, the dollar continued to strengthen following robust manufacturing data released by the Institute for Supply Management (ISM) and S&P Global, indicating a resilient US economy. Despite the generally favorable data, Federal Reserve Governor Christopher Waller suggested a preference for lowering the benchmark interest rate at the upcoming meeting scheduled for December 17-18, due to the enduring restrictive nature of the current monetary policy.The dollar index saw an increase of 0.59% against a basket of currencies on Monday, overcoming a modest decline that occurred the previous Friday, which had marked the first weekly drop since November 2023. In Asian trading on Tuesday, the dollar index saw limited fluctuations, hovering around 106.43.In Europe, the risk premium demanded by investors for holding French debt instead of benchmark German bonds has risen sharply. This tension followed remarks from Marine Le Pen, the leader of France's far-right National Rally party, who indicated that her party may support a vote of no confidence in the government unless a "last-minute miracle" occurs. Le Pen had also insisted that the French Prime Minister, Barnier, meet the party's budgetary demands by the coming Monday.On Monday, the euro dropped 1% during intraday trading to 1.0469 after comments from Federal Reserve officials underscoring the possibility of a rate cut in December mitigated some of the earlier losses.Kyle Chapman, an analyst at the Ballinger Group, commented via email, "The collapse of political confidence in France, coupled with unexpectedly strong economic data from the United States, has cast a gloomy landscape for the euro as December begins." The Ballinger Group specializes in currency risk management and trading services."As anticipated, the interim government is facing a confidence vote which is likely to fail. With new elections not scheduled until summer, there is no clear path for deficit reduction in the near term."The yield spread between French and German 10-year government bonds, which measures the premium investors require to hold French debt, increased by 7.6 basis points to 87.3 basis points. Last week, this spread had peaked at 90 basis points, the highest level since the eurozone sovereign debt crisis in 2012.Moreover, data released on Monday once again illustrated the resilience of the US economy, as November saw a notable improvement in manufacturing activity. For the first time in eight months, orders experienced growth, while input prices faced by factories substantially declined.The manufacturing purchasing managers' index (PMI) from the Institute for Supply Management rose to 48.4, up from 46.5 in October, which had been the lowest level since July 2023.In addition, the final value of the S&P Global manufacturing PMI was revised upwards from an initial estimate of 48.8 to 49.7.Juan Perez, the trading director at Monex USA, remarked, "Given the solid state of the US economy amid growing headwinds faced by overseas economies, the continuous rise of the dollar is reasonable. Such positive data will only drive US treasury yields higher while potentially lowering expectations for the Federal Reserve to implement loosening monetary policy." However, Federal Reserve Governor Waller emphasized on Monday that "policy remains sufficiently restrictive. Therefore, a rate cut at our next meeting would not significantly change the stance of monetary policy while leaving ample room to slow down rate cuts when necessary in the future."Following Waller's comments, market expectations, as indicated by CME FedWatch, increased the probability of a rate cut of 25 basis points this month from 66% late last Friday to 79%. Meanwhile, the likelihood of a Fed pause dropped from 34% last Friday to 21% for this meeting.Earlier, the dollar had seen an uptick amidst a shift in the US stance regarding promises from BRICS nations not to create new currencies or support alternative currencies, contrasting its earlier push for a weaker dollar policy. The Kremlin commented on Monday that any US attempt to compel nations into using the dollar would be counterproductive.The key to future interest rate prospects lies in the forthcoming November employment report scheduled for release on Friday, which is projected to show an increase of 195,000 jobs after October's report was affected by weather and strikes. The unemployment rate is expected to creep up from 4.1% to 4.2%.Today, significant US data will primarily focus on JOLTS job openings, with comments anticipated from Federal Reserve Governor Kugler and Chicago Fed President Goolsbee.The technical analysis of the dollar index indicates a conflict among the 5, 10, and 21 day moving averages, with momentum studies showing a downturn and the 21-day Bollinger band narrowing—resulting in a neutral signal on the daily chart. The resistance is pegged at the prior week's high of 107.55 and the peak seen on Wednesday at 106.92. Meanwhile, preliminary support levels are outlined at last week's low of 105.61 and the 38.2% retracement level of the October/November uptick at 105.05.If the index closes below 105.00, it could signal the end of the upward trajectory seen throughout October and November. Fundamental and technical indicators for euro/dollar imply further declineFrom a fundamental standpoint, there is limited justification for purchasing euro/dollar assets, and the technical outlook has shifted towards a bearish sentiment.The PMI data suggests a significant decline in factory activity within the Eurozone for November, painting a bleak future for the region. Adding to this discontent, nine factories associated with Volkswagen are on strike, reflecting a deepening rift between workers and management.Technically, the euro against the dollar is showing a contraction in the 21-day Bollinger band, with the daily momentum studies positioned neutrally. The 5, 10, and 21-day moving averages have all formed a ceiling, indicating a bearish trend on the weekly chart.Key resistance levels are identified at the 21-day moving average of 1.0591 and the recent range high of 1.0610, which should hold firm. Immediate support levels are established at last week's low of 1.0425 and the November low of 1.0331.A significant area of interest lies at 1.0470, which harbors $726 million in options due, and another at 1.0500 with $1.443 billion in options due.