EUR/USD surges on French election, but will it mind the gap?
Fawad Razaqzada April 24, 2017 1:23 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. 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.
Source: eSignal and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.