HelenRush

EURUSD: the Catalan factor won’t stay long

FX:EURUSD   Euro / U.S. Dollar
Euro had to interrupt its 4-day winning streak after the news that pro-independence parties secured a renewed majority in the Catalan parliament. Such election results reduce hope for mitigating the constitutional crisis in the country. As a result, EURUSD dived to lows in the 1.1816 area where it met “demand on dips” and recovered partially to the comfort zone at 1.1850.
Despite the election results are increasing the risk of reviving the independence drive in the province, the scale of the issue itself is limited and it will hardly challenge the growth potential of the whole euro area. So these immediate local political risks won’t hurt euro much in the longer term. Considering doubts in the US tax overhaul efficiency and subdued inflation in the United States, dollar will likely remain vulnerable, which will offset the current local risks for euro .
On Wednesday, the EURUSD pair peaked at the 1.19 1st December high and pulled back slightly. This resistance stays key to the upside. The break above will introduce scope to the 1.1945 area. As long as euro remains above 1.1780, the immediate bullish scenario is relevant
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