Risk-On After French Presidential Election


After the first round of the French Presidential election results were released, risk-on trading was back on the table. Now, this is what the market was expecting, as pollsters got it right this time. However, there was some traders took some risk off into the election, and we saw gold prices rise heading into the event. However, global markets rose in hopes Macron would win the second round of the French Presidential election, which will be held within the next few weeks. That in mind, this affected some exchange-traded funds (ETFs), most notably gold-related funds and the euro-related ETF.

SPDR Gold Shares

The SPDR Gold Shares (NYSEARCA: GLD) aims to provide investment results corresponding to the performance of gold bullion, less the gold Trust’s expenses. Now, gold is seen as a safe haven, and when it’s a risk-off environment, the yellow precious metal tends to rise, and vice versa. With uncertainty heading into the election, we saw gold prices rise just around $1,290 per ounce. Consequently, GLD rode this move up. Here’s a look at GLD heading into the election, on the 30-minute chart:

Source: TradingView

Trader Jason Bond stated, “The markets finally got what it was it expecting to happen. Risk-on trading is on, for now. The second round, and final round, of the French Presidential election will be held on May 7, 2017, and risk-off trading could be back on heading into that event. That said, gold-related ETFs and euro-related ETFs will be in focus.”

Here’s how GLD performed after the results came out, as of 11:50 AM ET on April 24, 2017:

Source: TradingView

GLD opened up down over 1%, but started to rebound thereafter.

Euro ETFs

Moving on, the euro got some relief after the French Presidential election, after the dollar slid. Markets seem to be pricing in a Macron event, but there is still some uncertainty in the final round. Let’s take a look at the Guggenheim CurrencyShares Euro Trust (NYSEARCA: FXE) and the ProShares UltraShort Euro (NYSEARCA: EUO).

The Guggenheim CurrencyShares Euro Trust aims to track the price of the euro. That said, after the euro got a pop following the election results, FXE rose by over 1%. Here’s a look at the performance of FXE:

Source: TradingView

With markets expecting Macron to win in the final round, this takes some risk off the euro, as Le Pen is looking to take France out of the EU, just as the U.K. did.

Now, the ProShares UltraShort Euro is an inverse leveraged ETF that tracks the U.S. dollar price of the euro. Specifically, EUO aims to provide two times the inverse performance of the USD price of the euro. That said, with the euro rising, EUO fell by over 2%. However, the French Presidential election could still surprise the markets, and it shouldn’t be placing such a high probability of a Macron win.

Look at EUO’s performance on the 15-minute chart:

Source: TradingView

Bottom Line

Markets were rising after the French Presidential election, after risk-on trading was back on the table. However, traders shouldn’t be overly confident in a Macron win, after all, there’s still one more round left, and pollsters could get it wrong.

Cover Image via nodigio

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With an upbringing rooted in deep ethical values, Yashu Gola knows how to put honesty and dedication into his articles. This young and dynamic financial analyst has done his graduation in IT engineering. His interests in financial writing have once brought him to our digital doorsteps. Since then, he has been an integral part of ForexMinute.com and writes the most captivating news-articles on the foreign exchange industry, cryptocurrencies, and medical marijuana trading.