For now, it’s hard to imagine this bounce being anything more than a slight sense of relief: there were no major surprises in the outcome of the first round of the French election, and I think it’s that to which markets are primarily reacting, together with the fact that the worst-case scenario of political deadlock may have been averted.
EUR/USD daily chart
Polls suggest that Le Pen’s far-right wing will win a relative majority and even a slight chance of winning an absolute majority. I remain skeptical about the latter, and in any case it is still too early to predict anything. A lot can still change in the days leading up to the second round on July 7.
We have outlined some key details about the seats here earlier.
Returning to the Euro, today started with a gap up, with EUR/USD consolidating gains mainly around the 1.0750-60 levels. The previous high reached 1.0775, but I would argue that the bounce on this day was less pronounced.
The US ISM Manufacturing PMI will be the next key risk event to watch later in the day.
Looking at the chart above, we still have the 1.0790-92 confluence of the 100-day and 200-day moving averages remaining. Alongside that, there is a significant offer at the 1.0800 mark. This will be a key resistance area to cap the EUR upside this week. And I think that is exactly what will happen.
Beyond that, there are a few other big options expiration dates to watch throughout the week.
Three issues expire on Wednesday at 1.0700 (1.5B), 1.0750 (1B) and 1.0800 (1.4B). On Friday, issues expire at 1.0700 (1.7B) and 1.0800 (1.9B). These will likely also help lock in price action ahead of the US non-farm payrolls figures.
Meanwhile, keep an eye on developments on the French political front as this will be another driver of EUR/USD price movement ahead of the big event on Friday.
