BUZZ-COMMENT-EUR/USD longs need Fed, data to validate bullish techs, spreads

Jan 27 (Reuters) - EUR/USD erased a sharp fall Monday before striking a 1-1/2-month high and could extend the rally much further if U.S. growth and inflation data -- along with the Fed -- lend fundamental support to bullish signals from technicals and yield spreads.

Today's EUR/USD dip reversed near short-term structural support in the 1.0450 area, increasing the possibility of a major inverse head-and-shoulders pattern developing. The neckline sits near 1.0600, suggesting the 1.0950/1.1000 area could be tested upon completion of the formation.

Rising daily and monthly RSIs imply upward momentum remains and January's monthly bull hammer reinforces bullish signals as does EUR/USD's hold above the 5- and 55-day moving averages.

The dollar's yield advantage over the euro deteriorated further as Treasury yields US10YT=RR extended their recent drop. German-U.S. 2-year spreads US2DE2=RR, which EUR/USD is correlated with, hit their tightest since Nov. 5.

This week, investors will focus on the Fed decision, Q4 GDP and December PCE.

The Fed is expected to hold rates steady. Should the statement and Chair Jerome Powell's rhetoric lean dovish, yields and the dollar may fall.

Additional downward pressure could be applied to the dollar if GDP indicates slower growth and PCE shows slowing inflation.

In that scenario, EUR/USD bulls may become emboldened, potentially leading to a short squeeze.

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