Yen Crosses and Catalonia’s Autonomy Suspension


Spain to move to take control in Catalonia and suspend Catalonia’s autonomy, which also suspends the power of the Catalan government, after Regional President Puigdemont refused the claim to independence, saying that independence is merely suspended to allow talks with Madrid. The central government in Madrid then declared that it “will continue with the procedures set out in Article 155 of the Constitution to restore the legality of self-rule in Catalonia”. The Spanish IBEX has lost -0.85% so far and is underperforming amid a broader move down in Europe. The Spanish 10-year bond meanwhile is up 2.5 bp, while Bund futures are down from earlier highs, but the 10-year cash yield remains down -1.5 bp on the day and is currently at 0.378%.

The Euro is under performing over the politics out of Spain and with EU’s Brexit Summit to be on the agenda today. Hence traders have turned to JPY as a bid on haven demand. Hence Yen crossed drifted lower on suspension of Catalonia’s autonomy, with EURJPY getting to 132.45 from 133.65, USDJPY at 112.52 low from 113.00 and GBPJPY at 147.88 low  from 149.30 low. The later was also affected from UK retail sales which underwhelmed for September , contracting by 0.8% m/m, well off the forecast for a modest 0.1% decline. Sterling dove by some 50 pips in the wake of the data release.

However sharp decline in yen crosses could present buying opportunities for the day. Therefore the hourly logged leg candle , which closed much higher and near 133.00, suggesting that the rally on the news seems to be temporary, triggered a LONG intraday position in EURJPY, at 133.05.  This position is based on the fact that the pair failed to break the lower Bollinger Bands pattern along with the 38.2 Fibonacci level, which was the immediate support level at 132.80. Next support levels are at 50.0 and 68.1 Fibonacci levels  at 132.60 and 132.40 respectively.

Targets are set at 133.30 and 133.47 which is at week’s highs. RSI is neutral in the jhourly chart, however in higher time-frames is sloping positively .


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Andria Pichidi

Market Analyst


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