EUR/USD tumbles to 1.0550 as US Dollar finds solid demand

• EUR/USD is smashed by a solid rebound in the US Dollar on Tuesday.
• Risk-on profile, weak Treasury yields fail to deter US Dollar bulls.
• EUR/USD is teasing a symmetrical triangle breakdown on the daily chart.

EUR/USD is heavily sold off below 1.0600, correcting sharply from two-week highs above 1.0700. The sharp upswing in the US Dollar across the board is smashing the Euro, despite the upbeat market environment.

As markets return from the long New Year weekend, they prefer to seek safety in the US Dollar ahead of the key economic events from the US this week. The first relevant US economic data will be released on Tuesday, the S&P Global Manufacturing PMI. Although the Fed December meeting minutes and Nonfarm Payrolls will hold the key.

The recent hawkish comments from European Central Bank policymaker Joachim Nagel also fail to offer any support to the Euro, as EUR/USD sheds 0.90% to trade at 1.0570, at the time of writing. The pair also shrugs off the sluggish performance in the US Treasury bond yields, as the US Dollar demand dominates.

Meanwhile, an unexpected improvement in the German labor market is doing little to please Euro bulls. Germany’s Unemployment Rate dipped to 5.5% in December while the Unemployment Change dropped by 13K vs. expectations of +15K in the reported period. All eyes now turn toward the German inflation data for fresh trading impetus.

EUR/USD: Technical outlook

EUR/USD has breached the rising trendline support at 1.0630, with a daily closing below it awaited to confirm a symmetrical triangle breakdown.

Further down, the pair has also taken out the critical 21-Daily Moving Average (DMA) support at 1.0601, exposing the 1.0500 round level.           

The 14-day Relative Strength Index (RSI) has dipped sharply toward the 50.00 level from around 70.00, justifying the latest downtick.

On the other side, EUR/USD needs to recapture the 21DMA support-turned-resistance to attempt a tepid bounce. Further up, the triangle support now resistance will come into play.

EUR/USD: Daily chart

EUR/USD: Additional technical levels to watch