Forex Trading Library

French elections: Brace for a volatile open on Monday

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Summary:

  • Election campaigning to end on Friday, April 21st mid-night
  • Radio/TV silence to be maintained from Friday onwards
  • Polling stations to open at 8 AM on Sunday, will close by 8 PM
  • Initial results to be announced by 8 PM although counting of votes will continue
  • The top two candidates will face off in the second round vote on May 7th
  • Gold, EURUSD, French bonds at highest risk on Monday’s open
  • Australia and New Zealand markets closed on Monday could mean lack of liquidity in Asian trading

As French voters cast their ballots this Sunday, the markets are no doubt heading into next week with a lot of caution. After long months of election campaigning, there is still no clear front-runner, with the first round of the elections expected to be a tight race among all the top five candidates.

Despite a rather crowded first round, the National Front’s Marine Le Pen is widely expected to breeze through into the second round of polls. Such a scenario will cause unease in the financial markets, despite a Europhile politician expected to give stiff competition to Le Pen.

European bond markets, particularly the French sovereign bonds, the equities and the shared currency alongside gold are expected to come under stiff pressure this week as the markets open on Monday. Interestingly, the Asian session that opens on Monday will see Australia and New Zealand closed on account of Anzac day.

This could potentially increase the risks of thin but volatile markets which need to be factored into the markets on Monday open.

Timetable for Sunday’s first round vote

The official campaigning ends at midnight on Friday with a radio silence being maintained. There will also be no opinion polls being released from Friday midnight onwards in a proverbial calm before the storm.

On Sunday, French voters will be casting their votes at over 67,000 polling stations across the country as the polling booths open from 8 AM onwards and will close at 7 PM outside the big cities and at 8 PM everywhere else.

At 8 PM Sunday, the TV screens and radios brighten up as the final two candidates will be announced who will qualify for the second round. It could take a while as votes continue to be counted well past the 8 PM slot.

There is a possibility that if one of the candidates wins by a clear majority, the second round of voting can be technically called off, but of course, a lot remains on how France will vote.

Gold Outlook – What to expect?

A Le Pen victory  in the second round will no doubt put traders on the edge which could be a positive for gold. Gold prices rallied to a high of 1295.49 this week but failed to test the 1300.00 key price level and instead pulled back lower.

Thus, amid a risk-off environment, we could expect to see a near-term upside to 1300, if not higher on Monday’s opening session if the first round of elections will see Le Pen emerge as one of the candidates.

For traders who prefer to take a more guarded approach to trading gold, it would be ideal to shift focus to the weekly chart as shown below. Keep an eye on the evolving triangle pattern that is currently shaping up, which could offer some key insights.

Gold Weekly Chart: Symmetrical triangle
Gold Weekly Chart: Symmetrical triangle

To the upside, a breakout from the triangle will trigger a move towards the July 2016 highs of 1374 which marks the top of the triangle pattern. To the downside, watch the support/resistance level at 1197 – 1200 level. This week’s close will be of importance however as a doji close could potentially add more uncertainty to gold prices from a technical perspective as well.

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