EUR/USD is at risk of falling below critical support at 1.1705

EUR/USD has extended its decline as the crisis around China's Evergrande deepens. As FXStreet’s Analyst Yohay Elam notes, critical support at 1.1705 is eyed.

See: EUR/USD set to challenge the 1.1665 August low – SocGen

Fear has taken over markets and it is weighing on EUR/USD

“Evergrande owes some $300 billion to lenders. Authorities have been reluctant to bail it out. Uncertainty about the implications for suppliers, other construction firms and further contagion casts a dark cloud over markets all over the world. The safe-haven dollar benefits from concerns about global growth.” 

“The greenback is buoyed by tensions toward Wednesday's Federal Reserve decision. If Fed Chair Jerome Powell signals withdrawing stimulus already in November, it could further dampen the market mood.”

“German finance minister Olaf Scholz remains in pole position to replace German Chancellor Angela Merkel. A coalition including the business-friendly FDP – potentially after long deliberations – would calm nerves. Nevertheless, uncertainty ahead of Sunday's vote is adding pressure on the euro.”

“Critical support awaits at 1.1705, which cushioned the pair in mid-August and then capped. Further down, the next levels to watch are 1.1685, a temporary cap from August, and then the summer trough of 1.1660.” 

“Resistance awaits at 1.1735, a swing low from last month, then 1.1750 and finally the round 1.18 level.”