BUZZ-COMMENT-EUR/USD’s payrolls bounce may only slow drive to parity

July 8 (Reuters) – EUR/USD struck a fresh 20-year low of 1.0072 on EBS on Friday before erasing losses and turning positive after U.S. jobs data, but a test of parity and possibly beyond remains probable — even if takes more time.

Above-estimate jobs data rallied U.S. rates EDZ2US2YT=RR and the dollar, but a second look at the report left investors interpreting it as less robust than headlines suggested nL1N2YO2M6.

Month-on-month and year-on-year average hourly earnings dropped from the prior month nAPN0OBYBU while the household employment survey fell 315k. The wage data numbers indicate cooling inflation while the household data supported the softer take on the job market, which was reinforced by reports earlier in the week.

While investors are likely to expect the Fed to deliver another 75bps hike in two weeks, doubts about tighter policy beyond that may increase.

The dollar maintains its yield advantage over euro US2DE2=RR which should help keep downward pressure on EUR/USD.

Daily technicals highlight risk of a short squeeze. Daily RSI diverged on the low and a long legged doji formed.

EUR/USD’s longer-term down trend is intact but its pace should slow, especially ahead of June 13 U.S. CPI USCPI=ECI.

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(Christopher Romano is a Reuters market analyst. The views expressed are his own)

((christopher.romano@thomsonreuters.com;))