EUR/USD traded close to flat Monday as balanced risks kept investors wanting for directional cues, and upside is likely to be a struggle unless upcoming U.S. data cooperates.
Hawkish comments from St.
Louis Fed President James Bullard -- a non-voter this year -- helped rally rates SRAU3 and underpin the dollar.
Bullard said recession probabilities for 2024 are overstated and rates may still need to rise another half-point in 2023.
The CFTC report indicated net-short dollar positions increased while net-long euro positions rose to the largest since October 2020, which could act as a weight on EUR/USD, especially if investors sense downside risks are growing.
EUR/USD longs need help from U.S. data to overcome those hurdles.
weekly and continuing claims are due Thursday and an upside surprise would indicate job market softening.
Q1 and April PCE, the Fed's favorite pricing gauge, are due Thursday and Friday.
Downside surprises would indicate disinflation and may invalidate hawkish Fed rhetoric.
U.S.-German spreads may tighten to erode the dollar's yield advantage over euro and underpin EUR/USD.
EUR/USD may hold a tight range until the data risks pass.
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