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EUR/USD: Further downside in play ahead of Catalan independence outcome

EUR/USD: Further downside in play ahead of Catalan independence outcome

The EUR/USD pair breached the 1.1800 leaves for the first in three days on Monday, set-off the week on the defensive, as political uncertainty surrounding Catalonia’s independence vote remains the key focus.

EUR/USD: Politics take centre stage

The spot is seen wavering in a tight range around 1.18 handle, having extending its losing streak into a third day today, as markets digest the latest ECB headlines on QE and Friday’s Draghi’s speech.

The Euro accelerated declines in Asia, following Bloomberg headlines that cited, ‘Some ECB policymakers see QE limit of just over EUR2.5trillion’. Meanwhile, the ECB Chief Draghi’s comments on Friday, noting that a very substantial degree of monetary accommodation is still needed, also continues to dampen the sentiment around the common currency.

Over the last hour, the losses appear capped, as markets believe that the chances of a Dec Fed rate hike are in doldrums, after a miss on the US CPI and retail sales data reported last Friday. However, this could be temporary and the bears could be gearing for further downside below a break of 1.1790 support, as the political jitters are likely to keep the bearish momentum intact.

Catalonia nears the 5-day deadlines to confirm if they want to declare independence later today, as offered by the Spanish PM Rajoy last week.  Meanwhile, the ANC Leader Sanchez noted earlier today that Catalan reply to Spanish PM Rajoy will be clear.

EUR/USD Technical View

Valeria Bednarik, Chief Analyst at FXStreet wrote: “Shorter term, and according to the 4 hours chart, the technical picture is neutral, with the price stuck within moving averages, and technical indicators lacking clear directional strength around their mid-lines. Additional declines could be seen on a break below 1.1795, but it will take a break below 1.1720 to see the pair turning actually bearish these days. Support levels: 1.1795 1.1760 1.1720 Resistance levels: 1.1865 1.1890 1.1930.”

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