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EUR/USD: Parliament hung but with unexpected twist – OCBC

He Euro (EUR) The stock market started the week on a slight weakness after the second round of elections produced a somewhat surprising result, note OCBC FX analysts Frances Cheung and Christopher Wong.

Left government may be a slight negative for EUR

“The left-wing NFP alliance is leading with 182, Macron’s centrists with 163 and the far-right RN and its allies with 143. The result shows how fluid and unpredictable elections can be, as markets were so fixated on a far-right victory. It also shows how tactical retreats in the second round of elections can affect the far-right and change the final result.”

“A left-dominated government was the least expected and most feared, as public spending could rise, putting further financial pressure on public finances. The only consolation here is that the result is a hung parliament, and the left does not have an absolute majority. They will need to find other parties to form a government. A left-leaning government may be a mild negative for the EUR in the short term.”

“EUR was last seen at 1.0833 levels. Mild bullish momentum on the daily chart remains intact but the rise in the RSI has slowed down. Risks in both directions seem more likely. Resistance level is located at 1.0870 (50% Fib). Support is seen at 1.0810 (38.2% Fib retracement of 2024 high to low, 100 DMA), 1.0730/50 levels (23.6% Fib, 21 DMA), 1.0660/70 levels (recent low).”

Source: Fx Street

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