The results of last weekend's French general election were shocking and have made the French financial market vulnerable in the coming weeks. Many people predict that the far right political party, the National League (RN), will have a strong performance, but the left-wing coalition, the New People's Front, has achieved a huge victory and won the most seats in parliament. The Ensemble caucus (ENS), a centrist coalition led by French President Emmanuel Macron, did not perform as expected but still defeated the National League, ranking second.

In the French National Assembly, which has 577 seats, the expected distribution of seats is as follows:

New People's Front (Left Alliance): 182 seats

Center Alliance (Macron's Center): 168 seats

The National League (far right) and its allies: 143 seats

Republican (Conservative): 60 seats

The election results resulted in a floating parliament, which means that no political party or alliance has obtained an absolute majority. This type of floating parliament may pose challenges to governance, as Macron's party needs to form alliances or negotiate with other political parties to pass legislation. This political instability will make the French financial markets and the euro vulnerable in the coming weeks.

The French capital market remained unchanged in early trading and even slightly declined. The CAC 40 index is attempting to rise, but further gains may be limited as traders await further news about the formation of a new government.

The borrowing costs in France remain high and may further increase. The leader of the left-wing coalition, Merronxiong, has stated that he will reduce the age of receiving pensions in France from 64 to 62, and he will also raise the minimum wage. Additional spending needs to be funded, and French bond yields are bound to rise further.

After the election, the euro remained relatively calm and maintained last week's gains. The euro also benefits from the weakness of the US dollar, and may rebound to 1.0900 against the US dollar in the coming days.

According to retail data, 36.57% of traders are net bulls, with a ratio of 1.73:1 between short and long positions. The number of net long traders decreased by 9.45% compared to yesterday and 35.06% compared to last week; The number of net short traders increased by 5.37% compared to yesterday and 53.85% compared to last week.

We usually hold opposite views to cater to market sentiment, and the fact that traders are net short suggests that the euro/dollar price may continue to rise. Traders have further increased their net short positions compared to yesterday and last week, and the current sentiment and recent changes have led us to have a stronger bullish reverse trading tendency towards the EUR/USD.