Demand for risky assets fell overnight after China raised its bank reserve requirements by 50 basis points. This action sent worries throughout the market that perhaps the Chinese economy was heating up too rapidly. The move is expected to keep growth under wraps.

Investors backed out of risky stocks and commodities on the news, pressuring the Australian, New Zealand and Canadian Dollars.

The AUD USD is trading in a tight range overnight. Volume has been light and the market is trading inside of Tuesday’s range. Unless this pair continues to break lower, a tight trading range usually suggests impending volatility which may mean the start of a short-covering rally.

The EUR USD continued its sell-off on Thursday after turning the main trend down on the daily chart earlier in the week.

Downside momentum indicates that the break is likely to continue down into an uptrending Gann angle from the 1.2644 bottom at 1.3544 on Friday.

Based on the main range of 1.2587 to 1.4282, the retracement zone at 1.3510 to 1.3434 is also a potential downside target.