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EURUSD Stays Up As French Election Results Injects Fuel

EURUSD spiked on Monday as investors rallied around the raised prospects that France’s far-right party would not amass enough seats to form a majority. The trading pair was up by 0.3 percent, its biggest daily gain in a week, to trade at 1.0747 in the European session.  Furthermore, the momentum around the euro suggests that EURUSD could record the third successive daily gain, underlining an element of bullishness around the pair.

Marine Le Pen’s National Rally party recorded a first round win in France’s snap parliamentary elections, beating President Emmanuel Macron’s Ensemble alliance by more than 10 percentage points. However, the RN fell short of the winning margins projected earlier, pausing a potential outright victory for now.

Le Pen supports increased borrowing, which many investors fear could worsen France’s debt burden. The negative perception around the debt situation could potentially see bond investors flee the Eurozone’s second-largest economy, which could have far-reaching impacts on a wider global scale.  The second round of voting will take place on July 7, and the RN party will look to build on its 33.2 percent first-round win.

Looking ahead the EURUSD exchange rate will be influenced by a series of high-impact economic data, headlined by the US PMI reading. The HCOB Eurozone Manufacturing PMI rose to 45.8 percent in June from May’s 47.3, beating the forecast figure of 45.6 percent. The Eurozone’s three-largest economies, Germany, France and Italy all reported forecast-beating PMI figures, underlining a strong foundation for gains by the euro. However, the preliminary figures for Germany’s CPI declined year-over-year to 2.2 in June, below the forecast 2.3 percent. That could put a lid on gains by EURUSD.  Elsewhere, ECB President Christine Lagarde will speak later in the day, and her speech could provide cues for EURUSD traders.

Technical analysis

The momentum on EURUSD signals control by the buyers, with the upside likely to continue if the action stays above the 1.0744 pivot mark. That could see the first resistance encountered at 1.0753, beyond which the pair could go as high as 1.0761. However, the sellers could take control if the exchange rate breaks below 1.0744. That could see the first support established at 1.0736, and a break below that mark will invalidate the upside narrative. Also, it could strengthen the downward momentum to extend decline to test 1.0724.