EUR/USD surges on French election, but will it mind the gap?
Fawad Razaqzada April 24, 2017 3:51 PM
Relief. That is the word that basically describes the sharp moves in the markets today. The euro and stock markets have absolutely surged higher on the back of news Emmanuel Macron secured almost 24% of Sunday’s first-round vote, suggesting he will probably beat Marine Le Pen in a run-off for the French presidency
Relief. That is the word that basically describes the sharp moves in the markets today. The euro and stock markets have absolutely surged higher on the back of news Emmanuel Macron secured almost 24% of Sunday’s first-round vote, suggesting he will probably beat Marine Le Pen in a run-off for the French presidency. The threat that a Eurosceptic leader will preside over France has therefore diminished sharply. However, the prospects of an unlikely victory for Le Pen remains and that may dampen the enthusiasm expressed by investors today. What’s more, there is always the possibility that the markets may have overreacted to the news. Thus, there is a risk that both the euro and European stock markets may ease back in the days to come, even if the German DAX index has climbed to a new record high level.
As far as the EUR/USD is concerned, well this pair has already filled a big chunk of the gap it created in reaction to the outcome of French elections. It turned lower after testing the 61.8% Fibonacci retracement level (around 1.0930/5) against the move down from November. It has since dropped back below the previous swing high at 1.0905 and below and old support and resistance level at 1.0875. it has potentially created a false breakout reversal pattern. If so, we could see a sharp move lower in the days to come. In the event the EUR/USD continues to ease later this afternoon, then it may drop to test an old resistance level at 1.0775/80 or go on to completely fill the gap to 1.0720/5 area.
Alternatively, if the EUR/USD recovers during the US hours later this afternoon and reclaims the prior swing high at 1.0905 then I wouldn’t be surprised to see the start of a potential move towards the bearish trend line and the next psychologically-important level of 1.10 in the coming days.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.