EUR/USD: Bears target 1.1720 on Spanish political woes, PMIs eyed

The outcome of the Catalonia referendum vote and the resultant chaos continue to spook the sentiment around the Euro, with the EUR/USD poised for a fresh leg lower heading towards the European opening bells.

EUR/USD breaks below the Asian low of 1.1770

The main currency pair meets fresh supply and prints fresh two-day lows near 1.1760 region, as the European traders hit their desks and react negatively to the Spanish political drama, in the wake of Sunday’s Catalan vote.

On Sunday, a referendum vote was held for Catalonia’s independence from Spain, of which 90% Of Catalans Voted "Yes". However, the tragedy unfolded after only 42.3% of Catalonia’s participated in the referendum, which Spain’s constitutional court has declared illegal. 

Hence, the renewed uncertainty around the Euro area political environment is likely to extend the EUR/USD’s corrective slide from above 1.2000 levels, should it breach the key support located near 1.1720 region. A break below the last, would pave the way for a test of August lows of 1.1662 levels.

The next direction in the spot will be also dependent on the upcoming macro releases from the Euroland and US in the week ahead, with the focus now shifting towards today’s batch of final manufacturing PMI reports from the 19-nation bloc and US ISM factories data.

EUR/USD Technical Set-up  

Karen Jones, Analyst at Commerzbank, explained: “EUR/USD’s outlook remains negative following the recent erosion of the 5 month uptrend and the 1.1836/23 late August and September lows. Intraday rallies are indicated to fail circa 1.1833/55. We look for further weakness initially to the 1.1662 August low and then the mid-June high at 1.1296 and the more important 1.1110 end of May low. Very near term the market is still bouncing off the 200 week ma at 1.1718 but this recovery should soon fizzle out.”