The Euro was unsettled during Wednesday’s trading session, as anxiety mounted ahead of Madrid’s looming deadline on Catalonia’s independence. With the region refusing to yield to the Spanish government’s demand to back down, things could get really messy on Thursday. A situation where Spain suspends Catalonia’s autonomy by invoking Article 155, has the ability to expose the Euro to downside risks.
Taking a look at the technical picture, the EURUSD is under noticeable selling pressure on the daily charts. Prices have dipped towards 1.1730 and are likely to venture lower amid the uncertainty. Traders will be paying very close attention to how prices behave around 1.1730, with a breakdown opening a path towards 1.1680. If bulls want a chance to jump back into the game, a daily close back above 1.1850 is required.
Dollar flexes its muscles
The U.S Dollar appreciated against a basket of currencies on Wednesday, as investor’s awaited fresh information on the appointment of a new Fed chair. This has certainly been a positive trading session so far for the Dollar Index, which has almost clawed back losses from last week. With the bullish sentiment towards the US economy likely to support the currency, further upside could be on the cards.
From a technical standpoint, the Dollar Index is turning bullish on the daily charts with 94.00 acting as a strong barrier. Technical lagging indicators such as the MACD and 20 SMA, support the bullish bias towards the Dollar Index on the daily charts. The breakout above 93.50 may encourage a further incline higher towards 94.00.
Sterling unimpressed by UK jobs data
Sterling dipped lower on Wednesday, after official figures showed that average earnings struggled to keep up with inflation.
Average hourly earnings including bonuses rose by 2.2% in the three months to August. Although this figure was above market estimates, it still remained far below inflation, which currently stands at 3%. The combination of subdued wage growth and rising inflation is likely to pinch consumers further, consequently threatening the sustainability of Britain’s consumer-driven growth. On the bright side, the UK employment rate between the months of June and August held at its 42 year low.
Taking a look at the technical picture, the GBPUSD is under pressure on the daily charts. Prices have dipped towards 1.3150 on Wednesday. Technical lagging indicators such as the MACD have crossed to the downside, while prices are approaching the 50 SMA. A breakdown below 1.3150 may encourage a further decline lower towards 1.3050.
Oil benefits from Iraq conflict
WTI Crude Oil is attempting to maintain itself above $50, with traders encouraged to enter buying positions following the news of a conflict in Iraq. The development from late last week that Iraqi forces had begun marching towards Kirkuk – an oil-rich province, has been seen as the catalyst behind the improvement in buying momentum for the Oil markets. Traders have basically bought into the idea that output from Kurdish controlled oil fields might be disrupted, where production output is thought to be approximately 600,000 barrels a day. It will take some time to see if this has actually been the case, but it has helped improve investor sentiment at the beginning of the week.
Taking a look at the technical picture, WTI Crude is turning somewhat bullish on the daily charts with a strong resistance found at $52.50. A breakout above this level may encourage a further incline higher towards $52.80 and $53.20, respectively.
Commodity spotlight – Gold
Gold extended losses during Wednesday trading session amid a strengthening Dollar. The $1300 level has proved to be a tough resistance, with prices currently trading towards $1280. Further downside is on the cards if bears can secure a breakdown and daily close below $1280, which may open a path towards $1267.