EURUSD has been contracting for more than a year now, with volatility remaining very low until the European elections. The rise of the far right has changed the political landscape across Europe, but the most affected country is France, following Macron’s surprise election decision. Macron’s risky bet against far-left and far-right parties is not working well for him right now. The elections, which will be held this and next weekend, might cause much more volatile moves for EURUSD.
According to the latest polls, the National Rally is comfortably in the lead but does not have enough support to hold the required majority. The main scenario for Le Pen would be a coalition with Macron, which might prevent a breakdown in EURUSD, at least for now. However, the political landscape changes in recent years are not favoring the euro, and the effects of the election might take longer to manifest than many expect, impacting both society and the budget. And for the election day, it may hold surprises for traders.
(EURUSD Daily Chart)
As the elections approach, the white trendline seems to be successfully holding the downward pressure. It is supported by the 38.2% retracement level, creating a support zone between 1.06 and 1.065. This is the main level to watch for direction. A break below this zone could lead EURUSD to the 1.04-1.0480 area in the medium term.
For upward moves, most of the key moving averages have gathered just below 1.08, making 1.08 a pivot point for more gains and possibly the key to a surge that might target the 1.09-1.10 zone if Euro bulls take control after the elections. Traders should note that the usual low-volatility environment might not be sustainable, and the wavelengths of moves might be longer in the coming week.
