- Projections show France’s Far Right Party will lead the first round of parliamentary elections.
- The Euro is the day’s best performing currency, increasing in value by more than 0.40%.
- European Indices soar! The Euro Stoxx 50 rises 1.85% and the DAX 1.00%.
- Investors turn their attention to today’s German Inflation data. Analysts expect the German Consumer Price Index to rise 0.2%.
FRA40 (CAC 40) – French Elections Trigger Volatility And “Bottom Fishing”!
By the market close on Friday, the French CAC was almost at its lowest level for 2024. Since Sunday’s elections, all European indices have risen and the French CAC trades 2.65%. Investors have bought the dip triggering a large price gap and a significantly higher price. Nonetheless, the price remains 7.00% lower than the index’s all-time high. The price is being influenced by three major factors; the upcoming earnings data, higher appetite towards stocks and of course the French elections.
Following an exceptionally high voter turnout, the National Rally is leading with 34% of the vote. The left-wing New Popular Front is in second place with 28%, and President Emmanuel Macron’s Ensemble Alliance has dropped to a disappointing third place with 20%, according to initial estimates. Although the National Rally seems poised to secure the most seats, France could be facing a hung parliament and increased political uncertainty. Even so, technical analysis signals a possible correction upwards, and the market is showing a clear “risk-on” sentiment. The higher risk appetite is due to the far right failing to win a majority. Bottom fishing refer to investors buying the bottom!
The risk-on sentiment can be seen across the global stock market. All European and US indices are increasing on Monday. The Euro Stoxx 50 has risen 1.85%, the DAX 1.00%, the SNP500 0.35% and the NASDAQ 0.40%. Some Asian stocks also continue to rise. Lastly, the VIX index trades 1.59% lower which also indicates a higher risk appetite.
In terms of technical analysis, the CAC40 is attempting to establish itself above the 75-Bar EMA and above the 50.00 on the RSI. On smaller timeframes, the momentum is also forming bullish crossovers further indicating an increase. The only concern for investors is the resistance level at 7,729.48, which pressured the index last week. If the price forms a breakout above this level, the index will likely see buy signals strengthen. If the price retraces to 7,614.55, traders have the opportunity to trade the upcoming breakout. However, if the price falls below this level, the buy signal will no longer be valid for the time being.
EURUSD – Investors Turn Their Attention To The German Inflation Reading!
The EURUSD continues to trade higher with strong momentum and has broken through the most recent resistance levels. The Euro is the day’s best performing currency with the index trading 0.40% higher, while the US Dollar is the worst performing. The US Dollar Index is trading 0.35% lower today so far.
However, investors should be cautious about the price action seen so far as volatility can quickly change after today’s German inflation data. Analysts expect the German Consumer Price Index to read 0.2%, slightly higher than the previous month. If the inflation reading is lower, the Euro potentially can come under selling pressure. In June, the number of unemployed in Germany rose by 19,000, surpassing the forecast of 14,000, with the unemployment rate reaching 6.0% instead of the expected 5.9%. Experts highlight the weakness of the German labor market, noting that companies remain cautious about hiring new employees, which negatively impacts the country’s economy. However, today’s inflation data will be the main driver along with the French elections and a potential hung parliament.
Technical analysis points towards buyers controlling the market and the exchange rate yet to obtain an “overbought” price. Currently, the RSI trades at 73.00 which means the price can rise a further 0.20% becoming overbought. However, this would depend on momentum.
Michalis Efthymiou
Market Analyst
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