Recently, exit polls revealed that Marine Le Pen’s far-right party, the National Rally (RN), emerged victorious in the first round of parliamentary elections in France. This political development had an immediate impact on the financial markets, particularly on the euro’s exchange rate against other currencies.
In response to the RN’s win, the EUR/USD rate experienced a significant surge, reaching its highest level since June 13. The EUR/USD chart displayed a notable pattern:→ Initially, a consolidation phase formed at the end of June, represented by an orange triangle;→ However, a bullish gap (highlighted in green) during the recent period broke through this consolidation pattern.
From a technical analysis perspective, if we measure the height of the consolidation pattern from the A-B extremes, it suggests a potential rise to the level of 1.08400 (the height of the pattern projected from the breakout level). Nevertheless, for this upward movement to materialize, bulls must surpass the resistance zone ranging from 1.080 to 1.078.
Despite the initial bullish momentum, traders should exercise caution as evidenced by the sharp downward reversal in the EUR/USD price following a Monday morning high. This reversal indicates the presence of supply forces in the market. Therefore, there remains a possibility of a price retracement towards the breakout level, entering the zone of the bullish gap.
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