These recent weeks has been really tense as pro-EU centrist Emmanuel Macron was running against anti-EU populist Marine Le Pen. At the end of last week, EUR/USD reached 1.1000 for the first time since November 9th last year – the day of the US presidential election.
On Sunday, Europe celebrated Emmanuel Macron’s victory in the French elections over Le Pen and it seemed we had our happy ending. But as we moved into the new week, there has been one unexpected development: Euro noticeably weakened and started losing its positions. Why is that and what does it mean for binary options traders?
French elections aftermath and the positions of Euro.
One thing that is important to understand in this is that it’s not that the Euro itself that is relieved. All the controversy that lead to this belief is convincing people to believe otherwise, but the French election result did not lead to the Euro becoming weaker. It is rather that trading markets had correctly predicted the results of the second round of the elections before the official result has been announced, so there isn’t anything to react to after that. The results were well predicted and did not come as a surprise (unlike the other elections result last year that did, in fact, resulted in some heavy turbulence on the trading market).
Now that we know that the results were fully predicted, it is also easy to understand that media lead us to believe the rumor that this outcome for the Euro was provided and is somehow unexpected. Considering the drop in short-term volatility measures between the first and second round, this is a normal situation and nothing to be concerned about. After the first round of the elections, EURUSD implied volatility sank to 7.47% after 13.45% on April 17. This is a rapid change but it was very well predicted by many experienced traders.
Also, for the past twenty years, May has always been the second worst month of the year for EURUSD rate and this pair has traded lower every May for the past seven years. So no election result should also be of any concern when it comes to analyzing the current situation. At the moment, traders should certainly keep an eye on the USD during the next few days as DXY Index has bled through two major support levels very quietly for these past days.
All in all, it seems like the French election outcome will in no way affect the usual way of thing on the binary options market. So traders can go back to their trading keeping this in mind and not buy in any media nonsense that has been going on or change their trading strategies in any radical way.
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