EUR/USD longs will need downside surprises in US pricing data
Oct 7 (Reuters) -EUR/USD traded near flat Monday but just above the 2-month low it struck last week and the current down trend may extend if U.S. data helps widen expectations for diverging Fed and ECB policy paths.
German August industrial orders fell more than estimated as growth in the euro zone's largest economy remains anemic.
The downbeat data may direct the ECB's attention toward growth, which could lead it to cut more aggressively as inflation moves towards target.
In contrast, the massive upside surprise in U.S. September payrolls could lead the Fed to place less emphasis on growth and put more on inflation.
U.S. September CPI and PPI as well as October University of Michigan consumer inflation outlooks will have investors' attention this week.
Data indicating inflation is sticky or rising again may drive investors to further reduce expectations for Fed rate cuts or even price in a pause in easing.
Terminal rate spreads between the Fed SRAM26 and ECB FEIZ5 and German-U.S. 2-year yield spreads US2DE2= may extend their recent trend of widening and increase the dollar's yield advantage over the euro.
EUR/USD's current down trend may extend towards 1.0775/1.0800.
Downside surprises for U.S. pricing may have the opposite effect and drive EUR/USD back above 1.1100.
For more click on FXBUZ
(Christopher Romano is a Reuters market analyst. The views expressed are his own)
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