European stock indices remain stable, unlike the French CAC 40, which has deviated from typical price behavior amid possible changes in the French government. The resignation of current Prime Minister François Bayrou is becoming increasingly likely: yesterday, all three major opposition parties announced they would not support the vote of confidence tied to the new budget reduction plan. The vote is scheduled for September 8, but it is already clear that Bayrou will not receive backing. As a result, there is a strong chance that the last minister loyal to President Emmanuel Macron may leave office. Against this backdrop, the risk premium on French bonds compared to German equivalents rose by 5.0 points, the highest level since early summer, while the index lost 1.6% in value.
Bond market dynamics remain the key influence: the 10-year bond yield rose to 3.501% from 3.414% last week, the 20-year to 4.095% from 4.022%, and the 30-year to 4.381% from 4.293%.
Top gainers in the index include STMicroelectronics NV (+0.43%), ArcelorMittal SA (+0.24%), and Kering SA (+0.20%).
Top losers are Vinci SA (–5.81%), Bouygues SA (–4.49%), Axa SA (–3.83%), and Veolia Environnement VE SA (–3.82%).
Support and Resistance Levels
On the daily chart, quotes continue to correct, moving away from the resistance line of the recently formed sideways channel with dynamic boundaries of 7950.0–7450.0.
Technical indicators weaken the relatively new buy signal: fast EMAs on the Alligator indicator are narrowing in range, while the AO histogram, remaining above the zero line, continues forming corrective bars.
Support levels: 7700.0, 7470.0.
Resistance levels: 7890.0, 8100.0.
Trading Scenarios
If the decline continues and the price consolidates below the support level of 7700.0, sell positions will be relevant with a target of 7470.0 and a stop-loss at 7800.0. Implementation period: 7 days or more.
If the market reverses and growth continues, with consolidation above the resistance level of 7890.0, buy positions will be relevant with a target of 8100.0 and a stop-loss at 7800.0.
Scenario
Timeframe: Weekly
Recommendation: SELL STOP
Entry Point: 7700.0
Take Profit: 7470.0
Stop Loss: 7800.0
Key Levels: 7470.0, 7700.0, 7890.0, 8100.0
Alternative Scenario
Recommendation: BUY STOP
Entry Point: 7890.0
Take Profit: 8100.0
Stop Loss: 7800.0
Key Levels: 7470.0, 7700.0, 7890.0, 8100.0