For the euro index, this could best be described as one of a long slow decline for the single currency, and of course the big unknown here is now the situation in the Spanish Catalan region, which could ultimately prove to be catastrophic for the EU project. What an irony if the region were indeed the ultimate sword to the heart of Brussels. Indeed Ambrose Evans Pritchard writing in the UK Telegraph last week stated “a remote threat has mushroomed suddenly into an existential crisis,”. This is a crisis none of the bureaucrats in Europe wanted or even saw coming, but which now has the potential to bring the euro house of cards crashing to the floor. To date, the crisis has been averted, but rest assured the problem has not been resolved and is likely to explode back into the headlines and impact the euro directly and violently. And whatever Draghi may or may not suggest in terms of tapering, and glowing economic data, this event is likely to carry more weight ultimately.
From a technical perspective the index continues to remain supported in the 130 region on the daily chart, but for how much longer, and if Catalonia does indeed prove to be the catalyst, then a move through here is likely to open the way to a sustained move lower and down to test support in the 127.50 region longer term.
By Anna Coulling