EUR/USD bulls take a breather near 1.20 handle

   •  China said to slow or halt US Treasury purchases.
   •  USD tumbles in reaction to the news report.

A strong wave of USD selling pressure emerged in the last hour, with the EUR/USD pair surging over 80-pips to move back above the key 1.20 psychological mark. 

The FX market responded to a news report that Chinese officials have recommended slowing or halting purchases of US Treasuries and the reasoning given is that the market for US government bonds is becoming less attractive relative to other assets. 

China being the single biggest foreign holder of the US Treasuries, the report spooked the fixed income market and triggered a sharp upsurge in the US bond yields. The reaction was understandable but was also seen as a negative development for the US Dollar.

As a consequence, the pair surged through the 1.20 handle before finding some sellers at higher levels, which now seems to have halted the strong up-move witnessed over the past hour or so. 

With the only scheduled release of import prices and the final wholesale inventories data, the US economic docket lacks any major market-moving economic releases and hence, the USD price dynamics would continue to act as an exclusive driver of the pair's momentum on Wednesday.

Technical levels to watch

A follow-through buying interest beyond 1.2015 level is likely to accelerate the up-move further towards the 1.2065-70 supply zone before the pair eventually makes a fresh attempt to conquer the 1.2100 handle.

On the flip side, 1.1970-65 zone now seems to protect the immediate downside, which if broken might turn the pair vulnerable to break below the 1.1900 handle and head towards testing its next support near the 1.1875-70 region.