EUR/USD Price Forecast: Doubling US bond-buying plan opens way for 1.1800

Market impact: moderately bullish EUR/USD, but vulnerable to reversal.

The key transmission channel is the sharp decline in long-dated US Treasury yields following the Treasury’s decision to at least double its longer-maturity buyback operations. Lower US yields reduce the dollar’s relative carry advantage and have pressured the Dollar Index, creating an immediate positive impulse for EUR/USD. The move is particularly supportive because markets also expect the ECB to raise rates in September while the Federal Reserve is expected to remain on hold.

For EUR/USD, the policy-rate divergence and US yield retreat reinforce the existing upward trend. The pair was trading near 1.1690–1.1693, with the article identifying a sustained break above 1.1700 as the condition for a potential extension toward 1.1800. However, the reported RSI near 74 indicates stretched short-term momentum, increasing the probability of consolidation or profit-taking before any further advance.

The Treasury operation should not be treated as equivalent to Federal Reserve quantitative easing. It is primarily a debt-management and liquidity measure, so its direct balance-sheet effect may be limited. The initial dollar weakness could therefore fade if Treasury purchases fail to produce a lasting decline in term premia, if long-end yields rebound, or if US data revive expectations of tighter Fed policy. A second risk is that markets interpret the intervention as evidence of rising US financing stress, which could eventually push long-term yields higher rather than lower.

Trading implications:

• Short term: bullish EUR/USD and bearish USD, especially while US long-term yields remain below recent peaks.
• Medium term: dependent on confirmation of ECB tightening, continued US yield compression, and a sustained break above 1.1700.
• Broader markets: falling US yields may also support other high-beta currencies and risk-sensitive assets, although a disorderly Treasury-market reaction would produce the opposite outcome.

The most important indicators to monitor are the US 10-year and 30-year yields, the Dollar Index around its recent lows, US employment and inflation data, ECB communication ahead of September, and whether EUR/USD can hold gains above 1.1700 rather than merely spike through it. Initial technical support cited in the report is near the 20-day EMA around 1.1547, while UOB’s nearer-term bullish threshold is 1.1600.