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Euro Recovers Post-Election Gap Lower, Major Ranges Confined

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  • The story of the day was the Euro which gapped lower at the open following the second round of French legislative elections. Results showed the right-wing RN falling short of a majority after a more resilient showing than expected from the centrist and left-wing parties and political paralysis is now the medium-term assumption for France's National Assembly.
  • However, the single currency shrugged off those concerns into the NY crossover, helped by the gradual re-tightening of the Bund/OAT yield spread.
  • Some volatility for the Japanese Yen kept EURJPY as the key cross of the day, rising from initial session lows of 173.52 to reach new cycle highs at 174.63. The trend structure here remains bullish and the recent break of a key resistance and bull trigger at 171.56, the Apr 29 high, confirmed a resumption of the uptrend. Sights are on 174.77, a Fibonacci projection.
  • Conversely, a resilient pound has seen prompted EURGBP to consolidate just below Friday’s closing level around 0.8450 and a bearish outlook remains intact for the cross. This view has been strengthened after respecting a key pivot resistance at 0.8500 last week, and the 50-day EMA also capping the upside.
  • Gains since Jun 14 appear to be a correction and initial firm support to watch lies at 0.8431, the Jun 25 low. A breach of this support would refocus attention on 0.8397, the Jun 14 low and bear trigger.
  • Risk-sensitive AUD & NZD are a touch lower on the day, however AUDUSD is consolidating some significant gains last week and notably remains above a key breakout level at 0.6714. The worst performers in G10 are the Scandinavian ccys, with EURSEK (+0.72%) rising to a 5-month high above 11.43 in the process.
  • Tuesday’s schedule includes commentary from both Fed Chair Powell and Treasury Secretary Yellen. There is no publicly known time for the publication of Powell's prepared remarks for his testimony before the Senate tomorrow at 1000ET. Market focus remains on Thursday’s US CPI data.
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  • The story of the day was the Euro which gapped lower at the open following the second round of French legislative elections. Results showed the right-wing RN falling short of a majority after a more resilient showing than expected from the centrist and left-wing parties and political paralysis is now the medium-term assumption for France's National Assembly.
  • However, the single currency shrugged off those concerns into the NY crossover, helped by the gradual re-tightening of the Bund/OAT yield spread.
  • Some volatility for the Japanese Yen kept EURJPY as the key cross of the day, rising from initial session lows of 173.52 to reach new cycle highs at 174.63. The trend structure here remains bullish and the recent break of a key resistance and bull trigger at 171.56, the Apr 29 high, confirmed a resumption of the uptrend. Sights are on 174.77, a Fibonacci projection.
  • Conversely, a resilient pound has seen prompted EURGBP to consolidate just below Friday’s closing level around 0.8450 and a bearish outlook remains intact for the cross. This view has been strengthened after respecting a key pivot resistance at 0.8500 last week, and the 50-day EMA also capping the upside.
  • Gains since Jun 14 appear to be a correction and initial firm support to watch lies at 0.8431, the Jun 25 low. A breach of this support would refocus attention on 0.8397, the Jun 14 low and bear trigger.
  • Risk-sensitive AUD & NZD are a touch lower on the day, however AUDUSD is consolidating some significant gains last week and notably remains above a key breakout level at 0.6714. The worst performers in G10 are the Scandinavian ccys, with EURSEK (+0.72%) rising to a 5-month high above 11.43 in the process.
  • Tuesday’s schedule includes commentary from both Fed Chair Powell and Treasury Secretary Yellen. There is no publicly known time for the publication of Powell's prepared remarks for his testimony before the Senate tomorrow at 1000ET. Market focus remains on Thursday’s US CPI data.