Jan 10 (Reuters) - EUR/USD appear to be on quite a road trip after forcing a 26-month low, with a robust U.S. payrolls indicating they will remain in the driver's seat. The December jobs report indicated continued U.S. exceptionalism, with unemployment unexpectedly dropping to 4.1% from 4.2% and estimates of 4.2% while payrolls grew by 256k from the prior's downward revised 212k and against forecasts of 160k. The U.S. Treasury 10-year yields hit a 14-month high and neared 4.80%, which rallied the dollar as the futures market projected a greater chance that the Fed will cut only once time in 2025. January University of Michigan 1-year and 5-year consumers inflation outlooks jumped higher, which reinforced the probability of a pause in Fed rate cuts. German-U.S. spreads widened, helping EUR/USD slide towards key support where the psychological 1.0200 level, 61.8% Fibo of the 0.9528-1.1276 rally and September 2022 monthly high sit.

Technicals highlight downside risks. Falling daily and monthly RSIs imply downward momentum remains and a monthly inverted hammer candle is in place for January.

U.S. December PPI and CPI next week will be key. Above estimate results could widen Fed and ECB terminal rate spreads which could sink EUR/USD towards parity or below.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)