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French Elections Give Euro Life; DXY at Major Trendline Support

French Elections Give Euro Life; DXY at Major Trendline Support

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- French elections come out just as the polls predicted, with Emmanuel Macron and Marine Le Pen advancing to round two on May 7. - DXY Index back to major trendline support as prospect of US government shutdown nears this Friday, April 28.

- See how the French elections fit in with the DailyFX Q2'17 forecasts.

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Higher yielding currencies and risk-correlated assets are running higher this morning thanks in no small part to the results of the first round of the French presidential elections. With Emmanuel Macron, the candidate most likely to beat Marine Le Pen in a runoff election advancing into the second round, the Euro is breathing a heavy sigh of relief that a French existential crisis will never materialize.

With implied volatility having run significantly higher in EUR-crosses ahead of the French elections, there's little room left to wonder why the Euro has traded so sharply higher at the start of the week. EUR/USD itself is paring its gains, however, as the DXY Index has come into longstanding support, the trendline going back to the May, June, and August 2016 lows.

While there may be a bit more juice to squeeze out of the French elections as a catalyst for Euro strength when the second round of voting takes place on May 7, the immediate focus in the days ahead is on the potential US government shutdown. If the US government does not get a budget in place by this Friday, April 28, the lights go out - plain and simple. The timing of such an event would be a significant negative catalyst for the US Dollar, which can't really afford one at the moment as it nears a major technical breakdown.

See the above video for a further discussion of the US Dollar's prospects this week as well as a technical review of the DXY Index, EUR/USD, AUD/USD, GBP/USD, USD/JPY, EUR/AUD, GBP/AUD, and Gold.

Read more: Get Ready for Gap Open in EUR-Crosses Thanks to French Election

--- Written by Christopher Vecchio, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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