French far left in a surprise win

The common currency opened with a negative gap today as the results of the French elections have taken the markets by surprise. Despite Le Pen’s far-right National Rally scoring a big win in the first round of the elections, in the second round, the far left (New Popular Front) got the most seats, with President Macron’s party coming in second and Le Pens’ far right third. The country may be entering a period of political instability as the far left does not seem willing to enter negotiations to form a coalition government, which in turn may start weighing on the common currency.

EUR/USD opened with a negative gap today yet recovered some ground during today’s Asian session, staying well within the boundaries set by the 1.0740 (S1) support line and the 1.0890 (R1) resistance level. We tend to maintain a bullish outlook for the pair given that the upward trendline remained intact and the RSI indicator despite edging lower remained well above the reading of 50. Should the bulls maintain control we may see EUR/USD rising above Fridays’ highs and aiming if not breaking the 1.0890 (R1) resistance line with the next possible target for the bulls being the 1.1010 (R2) level. Should the bears take over , we may see the pair breaking the prementioned upward trendline in a first signal that the upward movement has been interrupted and continue to break the 1.0740 (S1) support line, thus paving the way for the 1.0615 (S2) level.  

The USD edged lower yet recovered quickly the lost ground on Friday’s American session, as the US employment report for June sent some mixed signals for the US employment market. On the one hand, the Non-Farm Payrolls figure dropped less than expected which was a positive for the greenback, yet on the other hand, the unemployment rate ticked higher which was a negative. We highlight the release of the US CPI rates for June on Thursday, which provides us another piece of the puzzle, yet still consider the Fed’s intentions as maybe the main driver for the USD. 

Other highlights for the day:

Today we note the release of Germany’s trade balance and retail sales growth rates, both for the month of May as well as Eurozone’s Sentix index while BoE MPC member Haskel speaks. During tomorrow’s Asian session, we note Australia’s consumer sentiment for July and business conditions and confidence for June.    

On a technical level, we note that AUD/USD was on the rise over the past three days and during today’s Asian session, breaking the 0.6715 (S1) resistance line, now turned to support. As the pair’s price action has breached the 0.6715 (S1) level, we note that it has escaped the boundaries of its past rangebound motion and we switch our sideways movement bias in favour of a bullish outlook. The fact that the RSI indicator below our daily chart has neared the reading of 70, tends to support the idea of a bullish sentiment among market participants for the pair. Should the buying interest be maintained we may see the pair aiming for the 0.6870 (R1) resisrtance line. On the flip side, should the bears take over, we may see the pair breaking the upward trendline guiding it, in a first signal that the upward movement has ended, continue to break the 0.6715 (S1) support line clearly and aim for the 0.6575 (S2) support level. 

As for the rest of the week:

After a quiet Tuesday and Fed  Chairman Powell’s testimony before Congress,  on Wednesday we get from New Zealand, RBNZs’ interest rate decision, Japan’s corporate goods price, China’s, Norway’s and the Czech Republic’s inflation metrics all being for June. On Thursday we get Japan’s machinery orders and UK’s GDP rates both being for May, while later on we get from the US the weekly initial jobless claims figure and we highlight the release of CPI rates for June. On Friday, we get Sweden’s CPI rates for June, the US PPI rates also for June, Canada’s building permits for May and the University of Michigan consumer sentiment for July.

EUR/USD Daily Chart

• Support: 1.0740 (S1), 1.0.615 (S2), 1.0450 (S3)
• Resistance: 1.0890 (R1), 1.1010 (R2), 1.1140 (R3)

AUD/USD Daily Chart

• Support: 0.6715 (S1), 0.6575 (S2), 0.6445 (S3)
• Resistance: 0.6870 (R1), 0.7030 (R2), 0.7150 (R3)

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