Sellers ruthlessly attacked the vulnerable Euro on Friday after Catalonia officially declared independence from Spain. The downside was exacerbated by reports released after the announcement, of Spain’s senate granting Madrid the power to suspend Catalonia’s regional autonomy. The tension and uncertainty created from this bombshell development, has sparked investor jitters consequently exposing the Euro to downside shocks. With Catalonia declaring independence, this is likely to spark concerns of political instability in Europe and threaten the stability of the European Union. The Euro is in trouble and may find itself under extreme selling pressure next week, as anxiety heightens over the weekend.
From a technical standpoint, the EURUSD is heavily bearish on the daily charts. Prices are trading below the 50 SMA while the MACD has crossed to the downside. Previous support around 1.1680 is likely to transform into a dynamic resistance that encourages a further decline towards 1.1600 and 1.1500, respectively. For bulls to have any chance what so ever of jumping back in, prices need to trade back above 1.1730. It is remarkable how the Euro has had an unfortunate change of fortune this week. The first blow was dealt by the ECB’s dovish taper, and now the Catalonia chaos, has dealt the knockout punch just before the weekend.