The EUR/USD pair remains heavily offers so far this Monday, now hovering near daily lows struck earlier at 1.1781 levels, as the political jitters surrounding the Catalan independence declaration continue to weigh down on the Euro.
EUR/USD: Politics - Key driver
The spot extends its bearish momentum into a third day today, as the bears look to test the key support located near 1.1730/20 region amidst intensifying Spanish political drama, after the Catalonia’s President Carles Puigdemont sent a letter to the Spanish government, stating that he is ready to start dialogue with PM Rajoy’s government. Markets believe that the Catalan leader has suspended Catalonia independence mandate.
Meanwhile, the cautious tone behind the spot also persists, as markets await the speech from the Spanish Vice President Soraya Saenz de Santamaria, in response to the Catalan President Puigdemont’s letter to the Spanish government.
Further, a solid recovery staged by the US dollar across its main competitors also adds to the ongoing weakness in the major, while the sentiment also remains undermined on the back of the latest Bloomberg report, citing that ‘Some ECB policymakers see QE limit of just over EUR2.5trillion’.
All eyes remain on the developments around Catalonia’s independence declarations for the next direction on the pair. Meanwhile, the Eurozone trade figures may provide some fresh impetus to the EUR traders.
EUR/USD Technical View
Karen Jones, Analyst at Commerzbank notes: “EUR/USD continues to see a rebound from the 1.1662 August low. While we would allow for an extension to the 1.1900/14 resistance line and 2 nd August high, we think it will struggle here. This guards the 1.2092 high. We would treat a break below 1.1660 as the completion of a top formation for the market and a trigger for a sell off to the mid-June high at 1.1296 and the more important 1.1110 end of May low”.
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