The first round of French Election voting has been completed and markets have been able to finally exhale.
We now know that it will be Emmanuel Macron and Marine Le Pen that will face off in the second round of voting in two weeks time, as they came one and two in Sunday’s run off election.
As you can see from the below results, Macron and Le Pen have taken out the first round, with Macron clearly in front:
Macron is now expected to beat Le Pen more comfortably in the second round of voting come the 7th of May, with forex markets pricing the result in well and truly in advance.
This is because both the Socialist and the Republican candidates have asked their voters to vote for Macron in the run-off vote as they all have a common view that Le Pen’s far right policies are a risk to the Republic.
As traders, the Macron result means that risk is on as a vote for Macron is seen as a vote for stability.
Taking a look at the markets, this is EUR/USD in in initial aftermath:
EUR/USD 5 Minute:
Markets are happy!… BUT. Haven’t we been here before? What’s the saying about doing the same thing twice and expecting a different result?
So just keep in mind that markets are happy for now, but lets not get too far ahead of ourselves as traders. Our job is to manage risk and the risk of the biggest move is most definitely against the expected Macron second round win with a huge repricing to the short side in EUR/USD.
Do you remember this from our French Election and its Effect on Forex Markets blog?
"There are two rounds of voting and the first round winners don’t always end up taking power. Three in the last eight Presidential Elections have been won by the runner up from the first round and storming home."
That doesn’t exactly fill me with confidence. Not to mention that fact that neither Macron or Le Pen are members of established parties.
There are just so many unknowns to come!
Taking a wait and see approach as we assess the fallout and head into the second round of voting looks to be the intelligent play if you’re holding flat. Are you as risk averse in your trading as I am? Do you see opportunity in the midst of the fallout? Let us know by mentioning @VantageFX on Twitter and sharing your chart.
EUR/USD Daily:
The Daily shows both the horizontal support levels that price is bouncing between, as well as the EUR/USD 4 hourly trend line support level that price really used to kick higher off of. If you follow the Vantage FX blog then you would have liked that one and certainly be sitting pretty right now!
