Market Updates

EUR/USD

The market most traded FX pair remain on the defensive amid close results in French election.

The euro initially staged a brief relief rally at the start of the Asian trading session, but it has since given back all of those gains falling back below the 1.09 level. The main driver for EUR volatility has been the release of results from the first round of the French elections. Economists at MUFG Bank expect French election uncertainty to remain a modest weight on the euro. Euro could weaken further in the near-term if the opinion polls were to continue to narrow.

“The first-round results and the opinion polls pointing towards a close result in the second round will remain a modest weight on the euro in the coming weeks until there is clarity over the outcome of the second round of the election.”

“There is a risk that the euro could weaken further in the near-term if the opinion polls were to continue to narrow ahead of the second round. However, we remain of the view that President Macron will ultimately prevail albeit much less comfortably than last time around. If we are correct euro weakness on the back of nervousness over the election outcome should prove temporary.”

 

Gold

There has been a solid increase in the gold price during European trading hours. The yellow metal is now trading 0.81% higher at $1962/oz as it seems investors are flocking toward the safe haven. The weekend news that Vladimir Putin has given himself a four-week deadline to achieve victory in Ukraine could be one factor but there has also been a drop in stocks and the U.S. dollar since the EU session began.

Looking closer at the technical, the 4-hour chart below shows a decent break of the green resistance line at $1951/oz off the back of some decent volume. The price is now firmly away from the volume point of control (VPOC), often a bullish sign. Next up is the black resistance at the consolidation high. $1967/oz was a formidable resistance back in late March and it would be a good coup for the bulls. Beyond that, the recent high near $2078.8/oz is the one to beat.

On the downside, the levels are not really in focus now. The next support is back at the green horizontal line. There is also a trendline that was recently broken that could be retested again. Then the main VPOC area will be key if there is to be a retracement. All in all, the bulls are in charge right now and the black resistance line will be the focus for the rest of the session from a price perspective.

 

Bitcoin

Mexico's Third Richest Billionaire Warns of Severe Dollar Inflation — Says Buy Bitcoin to 'Save Your Skin'. Ricardo Salinas Pliego, gave some views on Thursday regarding inflation, hyperinflation, bitcoin, and fiat currencies at the Bitcoin 2022 conference in Miami, Florida.

Salinas proceeded to talk about central bank digital currencies (CBDCs). He brought up a picture of ECB Chief Christine Lagarde, BIS general manager Agustin Carstens, and U.S. Treasury Secretary Janet Yellen. He labeled them “The Villains.”

He said: “CBDC, central bank digital currency, that’s even worse than the dollar. It’s much worse than the dollar because if the CBDC is issued, these people will have full control over how you can spend your money.”

 

European equities

• European equities started the week on a negative note as investors weighed an array of risks from China’s Covid-19flare up to an uncomfortably tight race for the French presidency, surging bond yields and the war in Ukraine.
• The Stoxx 600 Europe Index fell 0.3% as of 11:20 a.m. in London, tracking Asian stocks lower. Technology shares were the biggest drag on the gauge, while banks outperformed on rising bond yields.
• The benchmark’s losses were cushioned by gains in French equities, including TotalEnergies SE and Societe Generale SA, after the first round of the country’s election gave incumbent President Emmanuel Macron a narrow lead over nationalist challenger Marine Le Pen. The CAC 40 index rose 0.7%.
• “While geopolitics is dominating, we believe that equities still offer supportive risk-reward over the medium term, and that the cycle is not over,” JPMorgan Chase & Co. strategists led by Mislav Matejka wrote in a note. “We look for more gains in earnings, bottoming out in China activity, after being cautious on the space last year, and expect the Fed not to turn ever more hawkish, relative to what is currently priced in.”

Sources*   Bloomberg, Bitcoin News, FXStreet, Business Insider.

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