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EUR/USD clearly sells the fact, but this may be

A big sigh of relief was heard in European capitals and throughout markets after Macron was elected president. But while  French stocks extend their gains, the euro extends the move, but to the downside.

The euro is sliding against the dollar with EUR/USD trading at 1.0935. The low was 1.0930 so far. And  this phenomenon is not unique to the world’s most popular currency pair. The common currency is also losing ground against the pound and the yen among others.

Ahead of the vote, we wrote that the risk is asymmetric: a victory for Macron is mostly priced in while a Le Pen one would be a total shocker. Indeed, euro/dollar climbed to 1.1021,  a new peak for 2017 and the highest in over five months. However, this did not last too long.

It is important to remember that the euro was on its way up ahead of the second round vote. After the televised debate on May 3rd, it became clear that Le Pen has no chance. Opinion polls showed a widening margin for Macron and the euro began climbing along stock markets.

So, we are seeing a clear “buy the rumor, sell the fact” phenomenon. Here is the daily chart, followed by an assessment about the future.

Will the selloff continue?

Not necessarily. Now that the French presidential elections are over, there are other  political events to dwell upon. The French will vote again, this time for the parliament. The National Assembly will not necessarily produce a majority for the young leader and his recently founded movement En Marche.

Elections and political uncertainty are also the fate of the UK on June 8th, with Brexit being the main topic. Further campaigns are going on in Germany and Italy is likely to hold elections in the not-so-distant future.

And what about the economy? We will get more  GDP data, this time from Germany. All in all, the old continent enjoys a continued  recovery.

The ECB may hint about the beginning of the end of QE in its June meeting. Despite Draghi’s desire, there are fewer reasons to sell the euro.

As the daily chart shows, EUR/USD trades in an uptrend channel since the beginning of the year. The recent selloff looks like a correction, not a change of course.

More:  EUR: Long Positioning Far From Elevated; A Buy On Dips – Credit Agricole

 

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.