EUR/USD: Hung parliament but with surprise twist – OCBC

The Euro (EUR) started the week on a slightly softer footing after 2nd round election results produced a somewhat surprise outcome, OCBC FX analysts Frances Cheung and Christopher Wong note.

Leftwing government may be a mild negative for EUR

“Leftwing NFP alliance is tops on 182, Macron’s centrists on 163 and the far-right RN and its allies on 143. The outcome shows how elections can be fluid and unpredictable as markets were so fixated on a far-right win. It also shows how tactical dropouts in round 2 elections can affect far-right and swing final outcome.”

“A leftist-dominated government was least expected and most feared as public spending may rise, further putting financial strains on public finance. The only consolation here is that the outcome is a hung parliament, and the left is short of an absolute majority. They will need to find other parties to form a government. A leftist leaning government may be a mild negative for EUR in the interim.”

“EUR was last seen at 1.0833 levels. Mild bullish momentum on daily chart intact but rise in RSI slowed. 2-way risks look more likely. Resistance at 1.0870 (50% fibo). Support at 1.0810 (38.2% fibo retracement of 2024 high to low, 100 DMA). 1.0730/50 levels (23.6% fibo, 21 DMA), 1.0660/ 70 levels (recent low).”