Intraday Market Thoughts

Ahead of Sunday's Elections

by Ashraf Laidi
May 5, 2017 19:11

Considering that most brokers have raised their margin requirements by 4-5 folds ahead of Sunday's French Elections, here is what (and why) we have decided with regards to our existing trades in EURUSD and GBPUSD. One trade was opened and one was closed at a profit. Access to Premium trades.

Ahead of Sunday's Elections - Macron Lepen Draghi (Chart 1)

Friday's euro gains could disappear in the considerable probability that Macron wins but not by the widely anticipated majority of 62%-38%, currently priced by markets (France-German 10 yr spreads plummeted by 48% from their 5-year highs in February, EURUSD volatility down 45% and EURUSD remains above 200-DMA).

The possibility that Macron wins by a less impressive margin of 8%-15% instead of the anticipated 20% margin could be brought about by large numbers of abstentions, an outcome which would work in favour of Marine Le Pen, or rather, against Macron ahead of the Parliamentary elections next month. Polls suggest that about 40% of those who voted for communist leader Melenchon in the 1st round (he came 4th) plan to abstain as Melenchon refuses to endorse neither Macron nor Le Pen. And in order for Macron to win by a dangerously slim majority -- or for Le Pen to produce a surprise win or a tie (dangerous for the euro and markets) is for voter turnout to be at 50%-55% participation instead of the anticipated 75%

And so as we warned in this evening's Premium trades, we closed one trade and opened another, while sticking with GBPUSD longs in order to lock in existing gains, while allowing for the probability of entering at more attracrive levels on Sunday evening after the whipsaws faded into the time when most trading platforms are open.


Latest IMTs