EUR/USD clocks fresh 7-week low of 1.17 on Spanish clash

Attacking the population for casting a vote is not acceptable in modern Europe. The police crackdown on the Catalonia independence referendum was indeed a sad news for Spanish democracy.

Despite the violence and repression from the police, over two million of Catalans cast a vote for Catalonia to become a new republic, independent from Spain, on Sunday.

Asian desks were sanguine yesterday as the Spanish clash was largely seen as a domestic issue initially. However, the Asian desks have realized the gravity of the situation, thus the common currency is being offered across the board.

EUR/USD fell to a 7-week low of 1.1702 in Asia and looks set to extend losses as the affair risks becoming a rotten apple if not addressed immediately. The resulting risk-off could boost demand for the safe haven German bunds, thus leading to a further widening of the US-German 10-year yield spread.

Yield spread chart

• The US-German 10-year bond yield spread currently stands at 189 basis points; its highest level since June 22.

EUR/USD Technical Outlook

FXStreet Chief Analyst Valeria Bednarik writes, " The pair settled in the 1.1740 region after trading as low as 1.1730, heading into the Asian opening with a persistent bearish tone in intraday charts, as the price holds near its September low of 1.1716, and further away from the 1.1820/30 region, a now key resistance area. In the 4 hours chart, the price settled below all of its moving averages, although the 20 SMA remains flat around 1.1780, indicating that the bearish trend has lost momentum, at least temporarily. In the same chart, technical indicators suggest the same, having turned flat, but given that they hold within bearish territory, the downside remains favored towards 1.1661, August monthly low."

Support levels: 1.1720 1.1690 1.1660

Resistance levels: 1.1780 1.1825 1.1860