EUR/USD longs were riding high on Thursday as the post-Fed risk-on theme fueled gains, but that rally stalled, leaving longs to confront a familiar set of risks ranging from China to technicals.
Investors' concerns about a potential default by China Evergrande group nL1N2QQ02J drove risk-off sentiment on Friday, which led to safe-having dollar buying, helping turn EUR/USD away from the 10-day moving average and negative on the session.
China's crackdown on cryptocurrencies nL1N2QQ0MG reinforced investors' anxiety, which drove them out of riskier plays.
Cryptocurrencies dropped sharply on China's policy moves nL1N2QQ0Z1, which had a spillover effect on equity and commodity prices.
The EUR/USD price action reinforced already bearish technicals.
The 10-DMA helped cap gains and daily RSI turned down again.
September's monthly inverted hammer candle and falling monthly RSI suggest EUR/USD shorts have the wind at their back.
EUR/USD shorts need a break and sustained hold below the 38.2% Fib of 1.0636-1.2349 and August monthly low to gain greater control and drive a test of key support near 1.1600.
A break below the 1.1600 area would suggest EUR/USD is due for a much deeper fall.
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