High-Risk, High-Reward Setup for CAC 40 Ahead of French Election
Updated
Fear is spreading, and while uncertainty is problematic, the most likely scenario involves a hung French parliament leading to less aggressive fiscal spending, as the EU will likely step in and impose sanctions on France. Additionally, the market is already offloading French government bonds, and France could face the market's wrath, similar to the UK during Liz Truss's brief tenure.
If normality returns, then the CAC 40 should soar, provided it trades above the January low of 7279.
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If normality returns, then the CAC 40 should soar, provided it trades above the January low of 7279.
This content is not directed to residents of the EU or UK. Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
Note
It is now quite clear that there will either be a hung parliament or a narrow majority for Rassemblement National (RN). France is already running a deficit of 5.5% of GDP, so any additional government spending will be hard to achieve without sanctions from the EU. Hence maybe the market panic will soon abate?The CAC 40 remains stable following the first round of voting. With the second round approaching, it seems likely that the CAC 40 will turn higher as long as the election proceeds as currently projected. However, a breach of the January low of 7277 would change the trend and outlook.
Note
The CAC 40 struggles to trade higher, but nothing major has changed in terms of the technical outlook. The only difference is that the new trend-defining level could be 7400 (election low), that traders will likely try to buy dips from 7600 to 7400.
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