The Euro found itself vulnerable to losses on Monday morning, thanks to heightened political drama in Spain.
Jitters over the Catalan developments were felt across the board, after Prime Minister Mariano Rajoy gave Carles Puigdemont until 08:00 GMT to clarify Catalonia’s independence status. Puigdemont simply ignored Madrid’s ultimatum, submitting a letter that failed to provide a clear indication on his response to the independence declaration last week. The Spanish government has given Catalan leaders until Thursday to officially declare independence, or back down.
Should Puigdemont officially declare independence, he may prompt Madrid to invoke Article 155 of the Spanish Constitution. Such a development is likely to intensify the political drama in Spain, and spark concerns over political instability in Europe that may ultimately punish the Euro.
Taking a look at the technical outlook, the EURUSD remains in a wide range on the daily charts, with 1.1850 acting as a level of interest. A decisive breakout above 1.1850 may encourage a further incline towards 1.1920. In an alternative scenario, weakness below 1.1850 may open a path back towards 1.1730.
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COMMODITY SPOTLIGHT – GOLD
Gold extended gains during Monday’s trading session, with prices venturing towards $1305 despite the Dollar stabilizing.
The yellow metal received a boost last Friday, after soft inflation figures from the United States in September clouded prospects of higher US interest rates in 2018. With political risk in Spain, and geopolitical tensions concerning Iran and North Korea still supporting some flight to safety, the yellow metal could find support in the short term.
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From a technical standpoint, Gold has broken above the $1300 psychological level, which may encourage a further incline towards $1315 and $1320, respectively. If prices fail to stay above $1300, this should encourage a decline back towards $1280.
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