A measured move higher for EUR/USD
July 12 (Reuters) -EUR/USD rallied to a fresh 1-month high Friday as investors lean towards the Fed making at least two 25bps cuts in 2024, and the gains could extend towards 1.1150 if current yield and tech dynamics persist.
The latest gauge of consumer inflation expectations indicated disinflation is in place. July University of Michigan 1-year and 5-year inflation expectations dropped to 2.9% from 3.0% in June. Consumer sentiment, current conditions and expectations all surprised to the downside.
The report helped drive U.S. Treasury 2-year yields US2YT=TWEB to a fresh 4-month low.
The dollar's yield advantage eroded further as German-U.S. 2-year spreads US2DE2=RR traded the tightest since March 1 and neared -165bps.
Yield influences helped drive bullish price action in EUR/USD, helping to generate a major bullish technical signal.
Daily charts show a large cup and handle pattern developed. Completion of the pattern suggests EUR/USD may rally as much as 225 pips, which is the measured move from the cup's base to its rim.
Investors are now likely to focus on U.S. June retail sales and industrial production. Reports indicating weaker economic growth may send rates SRAZ25 lower as the data would give the Fed more reasons to not cut.
Downbeat data may put EUR/USD on a path to the December 2023 high.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)
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