COMMENT-EUR/USD's correction may have run its course

EUR/USD turned lower Thursday after striking a four-session high, and the pair's corrective rally may be finished as U.S. data appears to be delaying Fed rate cuts and bearish technical signals emerge.

April Philly Fed business conditions came in at 15.5, which was well above estimates of 2.3 and also above March's 3.2 result. The prices paid component spiked up to 23.0 from 3.7 in March.

The pricing data fueled concerns inflation is running hot again in the U.S.

U.S. yields rallied with the 2-year (US2YT=RR) approaching the psychological 5.0% level.

German-U.S. yield spreads (US2DE2=RR) reversed earlier tightening and widened, increasing as the dollar's yield advantage over the euro.

Fed rate-cut expectations are being pushed back by investors and analysts as a result of recent U.S. pricing reports.

The latest Reuters survey of economists indicated the first Fed cut will come in September compared a June cut, which was indicated in the March survey.

Technical signals suggest downside risks are growing.

Daily RSI diverged on the four-session high and a daily inverted hammer formed. Those signals emerged after EUR/USD neared key short-term resistance in the 1.0690/1.0700 area.

The fresh bearish daily signals reinforce already bearish monthly signals.

EUR/USD still seems set to test 1.0450/1.0500.

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