According to Exit Poll estimates, the far-right Marine Le Pen has won the first round of France's parliamentary elections. However, expectations as to whether they will secure an absolute majority vary at this point. The current projected distribution of seats in the National Assembly can be found in the graphic below, The absolute majority is 289 seats.
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The euro is extending gains early in the session, with contracts based on the French CAC40 index (FRA40) gaining 2.6%, as the Popular Front and Macron's Ensemble party are expected to seek alliances in the second round of French elections to try to block Le Pen. This would dilute some of the more radical economic policies that markets have feared in a sustained Le Pen win (windfall tax, dividend withholding, share buybacks in the banking sector, among others).
A second factor that may support a positive market reaction is that France is likely to avoid a major political impasse in which no party wins any form of majority in the Assembly.
The key factor, therefore, seems to be to watch whether, in fact, the parties in opposition to National Rally will actually manage to form the necessary coalition alliances.
FRA40 gains 2.5% at the start of the week
French CAC40 (FRA40)-based contracts opened today with a price gap that knocked the index's quotations up more than 2.5%. Thus, the FRA40 is testing the 200-day exponential moving average (gold curve on the chart), which at the moment is the main resistance point on the chart. A possible upward breakout of this zone could take FRA40 to the zone connected by the 50-day and 100-day exponential moving averages (blue and purple curves on the chart, respectively). For the main point of support, on the other hand, if the current increases are erased, we can look for in the zone of last week's local minima.
Source: xStation
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