French CAC: Analysis, Targets and Price Drivers!

• Projections indicate that France’s Far Right Party will lead the first round of parliamentary elections.
• The Euro is the day’s best-performing currency, increasing in value by more than 0.40%.
• European indices soar! The Euro Stoxx 50 rises 1.85% and the DAX 1.00%.
• Investors are focusing on today’s German inflation data, with analysts expecting the Consumer Price Index to rise by 0.2%.

Following an exceptionally high voter turnout, the National Rally is leading with 34% of the vote. The left-wing New Popular Front is in second place with 28%, and President Emmanuel Macron’s Ensemble Alliance has dropped to a disappointing third place with 20%, according to initial estimates. Although the National Rally seems poised to secure the most seats, France could be facing a hung parliament and increased political uncertainty. Even so, technical analysis signals a possible correction upwards, and the market is showing a clear “risk-on” sentiment. The higher risk appetite is due to the far-right failing to win a majority. Bottom fishing refers to investors buying at the lowest price!

By the market close on Friday, the French CAC was near its lowest level for 2024. Since Sunday’s elections, all European indices have risen, with the French CAC trading up 2.65%. Investors have bought the dip, triggering a large price gap and a significantly higher price. Nonetheless, the price remains 7.00% lower than the index’s all-time high. The price is being influenced by three major factors: upcoming earnings data, higher stock appetite, and the French elections.

However, the outcome will depend on the political outcome and if indeed the French National Party fail to win a majority. In addition to this, the outcome will also depend on if the New Popular Front and President Emmanuel Macron can come to an agreement to join forces. If this is not possible, the political uncertainty can trigger another decline. Investors which have already entered into a buy position will now be hoping for political calm and for today’s German CPI to read lower than expectations.

The risk-on sentiment can be seen across the global stock market. All European and US indices are increasing on Monday. The Euro Stoxx 50 has risen 1.85%, the DAX 1.00%, the S&P 500 0.35%, and the NASDAQ 0.40%. Some Asian stocks are also continuing to rise. Lastly, the VIX index trades 1.59% lower, indicating a higher risk appetite.

In terms of technical analysis, the CAC40 is attempting to establish itself above the 75-Bar EMA and above 50.00 on the RSI. On smaller timeframes, the momentum is forming bullish crossovers, further indicating an increase. The only concern for investors is the resistance level at 7,729.48, which pressured the index last week. If the price forms a breakout above this level, the index will likely see buy signals strengthen. If the price retraces to 7,614.55, traders have the opportunity to trade the upcoming breakout. However, if the price falls below this level, the buy signal will no longer be valid for the time being.