Daily Analysis: Euro Dips on Catalonia Referendum

Monday Market Recap

Asset Current Value Daily Change
S&P 500 2526 0.41%
DAX 12902 0.58%
WTI Crude Oil 50.55 -2.17%
GOLD 1275.00 -0.76%
Bitcoin 4419 2.19%
EUR/USD 1.1736 -0.69%

While the question of Catalonia’s independence is a complicated one, even just concerning the economic dimension, the way the Spanish government handled the issue is simply disastrous. The pictures and footage of the police violence will likely help the separatist movements not only in Spain but also elsewhere in Europe, and that possibility was reflected in today’s market, as the Euro and the Pound both got under pressure. The common currency fell back below the 1.1750 level against the Dollar, while Cable traded under the 1.33 level for the first time in three weeks.

GBP/USD, 4-Hour Chart Analysis

The tragic Las Vegas shooting also weighed on sentiment today, but equities still drifted higher, confirming the underlying strength of the market. The DAX got close to 13,000 and its all-time high thanks to the Euro weakness, and the EuroStoxx 50 index also traded on a fresh 4-month high.

In the US, the Russell 2000 continued to lead the market, as small caps still benefit from the tax-plan related speculation, while the better than expected ISM Manufacturing PMI also helped stocks, with only the NASDAQ remaining relatively weak. Commodities are suffering today, as the Dollar strength is weighing on gold and crude oil alike, while the slightly negative change in sentiment failed to lift the precious metal.

Cryptocurrencies

Cryptocoins had a mixed session after the weekend with most of the majors drifting lower and only Bitcoin, NEO, and Ripple registering meaningful gains. The general direction of the segment remains positive even after Friday’s South Korean ICO ban, with still only the previously surging coins, namely Dash, Monero, and Litecoin performing significantly weaker.

Volatility, correlations, and trading volumes have been steadily declining since the crash more than two weeks ago, and bull market conditions are now back, with the long-term rising trends mostly being unscathed by the deep correction.

NEO/USD, 4-Hour Chart Analysis

Technical Picture

The DAX continues to trade in a strong uptrend, despite the Spanish woes, and the rising global yields, as the dip in the Euro backed the advance. The benchmark is now trading just below its all-time high, and with the MACD still not being overbought a test of the 13,000 level looks imminent. That said, traders shouldn’t be opening new long positions here, as the 10% rally in the index will likely be followed by a more protracted consolidation. Support is now found at 12,800 and 12650, while the all-time high is at 12,950.

DAX, 4-Hour Chart Analysis

Key Economic Releases on Monday

Time, CET Country Release Actual Expected Previous
1:50 JAPAN Manufacturing PMI 22 18 17
1:50 JAPAN Retail Sales 23 24 23
10:30 UK Manufacturiing PMI 55.9 56.3 56.9
16:00 US ISM Manufacturing PMI 60.8 57.9 58.8

Key Economic Releases on Tuesday

Time, CET Country Release Expected Previous
2:30 AUSTRALIA Building Approvals 1.1% -1.7%
5:30 AUSTRALIA RBA Rate Decision 1.50 1.50
5:30 AUSTRALIA RBA Statement
10:30 UK Construction PMI 51.2 51.1

Featured image from Shutterstock

Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.