Technical Tuesday – CAC 40

Political Shifts in France Impact Market Sentiment

The unexpected surge of the left-wing Nouveau Front Populaire (NFP) alliance in France's snap elections has taken both politicians and the public by surprise. Contrary to pollsters' predictions that Marine Le Pen’s far-right Rassemblement National would secure the most seats in parliament, the NFP clinched first place, with President Emmanuel Macron’s centrist alliance coming in second.

What's Next?

The immediate priority for the leftists, with Macron’s endorsement, is to select the next Prime Minister. The NFP aims to form a government and implement its high-tax, high-spending agenda. While the anti-capitalist leader of La France Insoumise, the largest group within the NFP, poses a potential threat to liberal economic policies, it is likely that a more moderate leftist candidate will be chosen for the Prime Minister role, especially since Macron’s Ensemble centrist party remains a significant force as the second-largest bloc in parliament.

Market Implications

On Monday morning, after a modest fall in early trading, shares in the CAC 40 showed a strong rebound, only to fall sharply just before 11am CET. Prices have since been fluctuating on a downward trajectory.

From a technical perspective, the CAC 40 index is once again testing a key resistance level at 7,725. According to Kim’s analysis, a daily close above this level is essential for the CAC 40 to establish a bullish trend, with potential upside to around 7,900. Conversely, if the CAC 40 fails to close above 7,725, the index may slide lower, possibly testing key support at 7,464. A daily close below this support level would likely resume the bearish trend, with no strong support until around 7,300.