EURUSD price expectation under political event - Catalonia Independence [Part 1]

After the Catalan independence referendum of 2017, the Spain government has also triggered Article 155 of its constitution, which allows it to suspend Catalonia’s political autonomy. It is the second crisis in EU since the Brexit in 2016, and it may cause a domino effect that could splinter the EU eventually. Our team is not going to explain what is going on in Spain nor judging who is right and wrong, but using quantitative approaches to study the market volatility behind these political events.




Above graph is the daily chart of EURUSD dated 29 Oct 2017. Fundamental finding are as following:

• H&S pattern that took three months to form
• Relative Strength Index stay bearish
• Daily close below 100MA
• Fibo trading range will be 0.236 to 0.382 (1.1679 - 1.1422)

All above findings support the bearish sentiment of EURUSD, it seems quite promising to short this pair in the coming month. With addition to our previous find in U.S. dollar bull target (U.S Dollar Index - What is the next target in 2018?), a short signal will be given in normal circumstance. But such trading is not recommended this time all because it is related to political event. There are some major reasons stopped our team from trading until further information pops up:

• Rigid polls/studies
• Price gap 
• Huge trading range and volatility

We will explain how fluctuate the market will be under the exposure of important news in Part 2 by showing you some quantitative anylysis.

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