Jumps on French election relief :: InvestMacro

• FRA40 ↑ as much as 3% on Monday

• Parties have till Tuesday evening to apply for second round

• Second round of election on July 7th
  

• Key level of interest – 7470 and 7700
  

FXTM’s FRA40 initially rebounded on Monday morning as investors welcomed the preliminary results of French parliamentary elections.

Although Marine Le Pen’s National Party dominated the first round, it was not enough for an outright majority in the second round scheduled for July 7th. The prospect of a hung parliament may be a market-friendly outcome despite the uncertainty it presents. Such a scenario could block Le Pen’s big spending plans that would have disregarded European Union fiscal rules and hit investor sentiment.

Note: A hung parliament is when no single political party wins a majority.

It is worth noting that all those who got votes of at least 12.5% are eligible to participate in the second round.

First round election results:

• National Rally (far-right): 33.1%

• New Popular Front (left-wing): 28%

• Renaissance and allies (centrist): 20.8%

Despite the initial positivity, European markets could remain tense ahead of the deadline on Tuesday evening for candidates to confirm whether or not they’re running.

Depending on how this plays out, it may shape expectations over what to expect in the second round of elections on Sunday 7th July.

Looking at the technical picture, we identified key levels on the FRA40 in our week published last Friday.

Prices jumped as much as 3% on Monday morning, punching above the 7700-resistance level before giving back gains. More volatility may be on the cards on Tuesday depending on how markets react to the candidates participating in round 2 of the elections.

Still, key support can be found at 7470 and resistance at 7700.