EUR/USD erased most of its gains Monday as longs seem to lack conviction ahead of a slew of U.S. data and Fed risks, which could set the stage for a move below 1.0500.

EUR/USD neared the 50% Fibo of the 1.0885-1.0602 decline then began sliding despite April German CPI indicating inflation remains sticky, which could fuel doubts the ECB will begin a sustained rate cutting cycle.

German-U.S.
2-year yield spreads US2DE2=RR, which EUR/USD is correlated with, actually widened on the session and neared key -202/-205bps support, a break of which could bring out EUR/USD sellers.

Erosion of EUR/USD gains Monday should concern longs as suspected intervention driving USD/JPY sharply lower failed to fuel EUR/USD gains, a potential sign that rally sellers hold the reins.

EUR/USD's rally off the April 16 low might not bolster bulls' confidence since it appears corrective in nature and a bear flag continuation pattern formed on daily charts.
The flag reinforces bearish signs from Friday's daily doji, falling monthly RSI and the pair's inability to hold above the aforementioned Fibo.

Investors are now focused on U.S. employment reports and Fed risks.

Should robust jobs data emerge and the Fed take a hawkish lean, U.S. yields and the dollar may rally, heralding a fresh leg lower for EUR/USD.

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