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Technical Outlook: EURUSD – Downside Risk Rises On Political Tensions In Spain

The Euro is holding in red in early Monday’s trading, weighed by rising tensions over independence vote in Catalonia. The pair dipped in Asia from session high at 1.1814, retuning into daily cloud (cloud top lies at 1.1789) which so far contained recent attempts lower. Fresh weakness in late Asia/early Europe is shifting near-term focus towards cracked key supports at 1.1720/10 zone (Fibo 38.2% of 1.1118/1.2092 rally/27 Sep correction low/weekly 200SMA). Bearishly aligned daily techs favor retest of 1.1720/10 pivots, firm break of which would trigger bearish extension towards 1.1594/71 (daily cloud base/100 SMA). Last week’s close in red and below the neckline of H&S pattern, formed on daily chart, weighs on near-term action, signaling deeper correction of 2017 1.0340/1.2092 rally. Broken 55SMA which capped recovery attempts last week offers initial resistance at 1.1822, which should ideally cap today’s action. Plethora of barriers that lies above, consisting of 10SMA (1.1850) and converging 30/20SMA’s (1.1893/1.1900) should keep the upside protected and maintain bearish pressure. EU Manufacturing PMI for September (58.2 f/c, unchanged from Aug) and Unemployment rate (Aug f/c 9.0% vs 9.1 in July) are in focus of European session.

Res: 1.1789, 1.1822, 1.1850, 1.1875
Sup: 1.1720, 1.1662, 1.1594, 1.1571

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