EUR/USD, Oil Forecast: Two trades to watch

EUR/USD rises to a 5-week high ahead of the French vote of no confidence

• French PM Bayrou is expected to lose a confidence vote
• USD struggles after weak NFP on Friday
• EUR/USD rises above 1.17 to a multi-week high

EUR/USD is rising, reaching a multi-week high on the back of a weaker USD and despite French political uncertainty.

EUR upside is no doubt being held back by French politics, where Prime Minister Bayrou today holds a vote of confidence on his planned 2026 budget.

His plans to tackle Frances' 5% of GDP budget deficit have been met with opposition across the political spectrum, and he is not expected to pass the vote. As a result, France could be looking for its 5th Prime Minister in three years if Macron is forced to call fresh parliamentary elections. However, this may not necessarily be the case; there is uncertainty over whether the macro would try to appoint another Prime Minister.

French assets sold off when Bayrou called the vote last month, and that pressure has eased since. French stocks and bonds are slightly outperforming European peers on Monday. However, persistent political uncertainty in the eurozone’s largest economy could take its toll.

A slew of upcoming rating reviews are also in focus this week as well as the ECB rate decision on Thursday.

The U.S. dollar is under pressure after Friday's non-payroll report left the markets fully pricing in a 25 basis point rate cut from the Fed later this month or even a larger 50 bps reduction.

The data showed that the US labour market is cracking, and the Fed may need to cut rates faster. This week's focus will be on Thursday's inflation figures, which are expected to rise to 2.9%YoY from 2.7%. Cooler-than-expected CPI data could add to larger rate cut bets, pulling USD lower.

EUR/USD forecast – technical analysis

EUR/USD is rising above 1.17, breaking above the holding pattern and the falling trendline resistance. A close above 1.17 opens the door to 1.18 and 1.1830, the 2025 high.

Support is at 1.17, with a break below here opening the door to 1.1580, the mid-August low. A break below here exposes the rising trendline resistance at 1.1540 ahead of the 1.14 August low.

Oil rises on Russia oil sanction worries & despite OPEC+ agreeing to increase supply

• OPEC+ agreed to increase supply by 137k bpd
• Trump threatened further sanctions on Russian oil
• Oil found support on August’s low

Oil prices are gaining on Monday, rising 1% recouping some of last week's 3.5% losses, helped by the prospect of more sanctions on Russian crude oils and despite OPEC+ agreeing to further production from October.

OPEC+ members met over the weekend and agreed to raise oil production further from next month. OPEC has seen an increasing output since April after years of cuts to support the oil market.

The oil cartel will lift output from October by 137,000 barrels per day next month. This is lower than the 555,000 barrels per day agreed for August and September, and 411,000 for July and June. The modest output increase has spurred a sense of relief.

The prospect of increased output is being offset by expectations of tighter supply from new U.S. sanctions on Russia.

President Trump said on Sunday he is ready to move to a second phase of sanctioning Russia, suggesting he's on the verge of ramping up sanctions against Moscow or buyers of Russian oil over the war in Ukraine.

#Russia launched its largest air attack of the war on Ukraine, setting government buildings on fire in Kyiv, resulting in fading hope of a peace deal.

Oil forecast – technical analysis

Oil trades within a descending channel dating back to 2023. The price trades below its 200 SMA in a bearish trend. Oil failed to rise above the 50 SMA and the 65.00 round number, rebounding lower, before finding support at 61.50, the August low.

The recovery would need to rise above 65.00 to create a higher high and expose the 200 SMA at 67.40.

Otherwise, the bearish trend remains intact. Sellers must extend the bearish move below 61.45, the August low, and 60.00 round number, to create a lower low and spur a deeper selloff towards 55.00.