BUZZ-COMMENT-Some upside risks for EUR/USD are building

Jan 21 (Reuters) - After a wild first two days of Trump 2.0, the net result for EUR/USD appears to be that investors have become less confident of further downside as bullish influences take deeper root.

After spiking higher with the help of tariff-relief sentiment on Monday, EUR/USD initially slid on Tuesday as the dollar rallied on President Donald Trump's threat to impose duties on Canada and Mexico before short-term structural support halted the decline and recovery set in.

The dollar's yield advantage over the euro has decreased as German-U.S. 2-year yield spreads US2DE2=RR have trended tighter since September while terminal rate spreads for the Fed SRAM26 and ECB have been tightening since mid-December.

Meanwhile, CFTC data indicate net-short euro positions decreased for the second week in a row, and technicals are flashing warnings to EUR/USD shorts.

The pair rallied above the down trend line off the Dec. 6 daily high and is threatening to break the down trend line off the Sept. 30 daily high.

EUR/USD is trading above the 5- and 21-day moving averages, both of which sit near structural support in the 1.0330/50 zone.

Daily charts show the right shoulder of an inverse head and shoulder pattern developing while the monthly chart shows a bull hammer candle in place for January after the 61.8% Fibo of the 0.9528-1.1276 rally was briefly pierced.

Monthly RSI is diverging on the 26-month low struck on Jan. 13.

Should the U.S. interest rate complex weaken, the dollar could fall sharply, which could squeeze EUR/USD shorts hard.

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

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