The euro was elevated to levels not seen since March 2017 at 1.0777 during Thursday’s trading session, as participants discarded short positions ahead of the first round of the French Presidential elections this weekend. Although the euro has continued to display resilience against pre-election jitters, investors should be under no illusion that this has to do with a change of sentiment. With political uncertainty still a recurrent theme in Europe, the incredible rebound that the euro has staged may be utilized by longer-term bears to send prices lower.
The latest opinion poll figures that indicate a fierce competition will be taking place between the four candidates in this first round have simply added to anxieties, as speculators ponder over which of them will be seizing the title of President. Although Centrist Emmanuel Macron has been labeled as the favorite to become the next French President, it must be kept in mind that millions of French voters remain undecided, fueling concerns of a potential election shocker. The threat of Marine Le Pen winning the election remains live, and the risks associated with such a victory may ensure further downside pressures on the euro.
From a technical standpoint, the euro/U.S. dollar (EUR/USD) currency pair is challenging the 1.0750 level on the daily charts. A solid daily close above this level could open a path towards the next level of interest at 1.0820. If bulls fail to maintain control above 1.0750, then the euro could edge back down towards 1.0685.
Dollar remains on the back foot
A flurry of disappointing U.S economic data and rising concerns over Trump’s ability to push through with the phenomenal tax cuts he promised during his election campaign have left the Greenback vulnerable to steep losses. With the Trump rally displaying signs of exhaustion, speculation over the Federal Reserve raising U.S interest rates in June has taken a hit, with probability falling to 46.6%. Investors remain on edge over the heated tensions between the U.S and North Korea, which may have complimented to the downside. From a technical standpoint, the Dollar Index remains pressured on the daily charts, with a break below 99.50 opening a path towards 99.00.