EUR/JPY trades at 4-month high, is Macron victory priced-in?

EUR/JPY is trading at 123.62 this Friday morning in Asia; its highest level since January 9.

The currency pair bottomed out at 114.85 (Apr 17 low) and has enjoyed a near 90 degree rally over the last two weeks as polls showed Macron maintaining a significant lead over the anti-EU candidate Marine Le Pen.

Moreover, the ‘hope trade’ was set in motion following Macron's victory in the first round of elections... As predicted by the polls. 

European stocks attract $883 million

As per Reuters report, European stock funds continued on their hot streak in the week ended May 3, reeling in $833 million in their biggest haul since March. It is quite clear from the sharp rise in the EUR/JPY that a major part of the fund flow into European stocks has been from the Asian markets.

What it also tells us is that Macron win is priced-in and the markets are dangerously unprepared for Le Pen victory. The near 90 degree rally could be followed by a 90 degree drop if Le Pen comes out victorious.  Meanwhile, we could be in for a classic “Buy the rumor, Sell the fact” kind of trade if Macron wins the elections.

EUR/JPY Technical Levels

The cross was last seen trading around 123.60. The daily RSI is overbought, which warrants caution. The first resistance is seen at 123.85 (Dec 30 high) ahead of 124.09 (Dec 15 high) and 124.55 (weekly 100-MA). On the downside, support is seen at 123.00 (zero figure), 122.85 (5-DMA) and 121.84 (10-DMA). Only a daily close below 10-DMA would signal bullish exhaustion.