EUR/USD investors may get comfortable being long
July 3 (Reuters) -EUR/USD rallied to a 3-week high after breaking the 200-DMA and daily cloud top, with investors potentially more confident the upside risks are increasing after the latest U.S. data and rhetoric from Fed Chair Jerome Powell.
June ADP indicated payroll growth is slowing while weekly and continuing claims indicate joblessness continues to increase.
Additional downbeat data for the U.S. economy came from June ISM non-manufacturing. Headline PMI came in at 48.8, below the 50 level that indicates contraction, versus estimates for 52.5 and May's 53.8.
Services employment deepened its contraction as it printed 46.1 against May's 47.1 while prices paid dropped to 56.3 versus the prior 58.1.
The slew of data suggests the Fed may be able to take a less restrictive stance going forward.
U.S. yields US10YT=RR dropped sharply and the dollar's yield advantage over the euro decreased as German-U.S. spreads US2DE2=RR hit their tightest since June 7.
The data has investors thinking the Fed will gain the confidence to deliver 50bps of cut in 2024 especially after Powell said Tuesday that the trend of disinflation showed signs of resuming.
EUR/USD longs have June's monthly high targeted and likely target the March high as well.
A downside surprise to June payrolls may see those targets met.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)
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