EUR/USD Price Forecast: Doubled US Bond Buybacks Open Path Toward 1.1800 Now

The Euro climbed to a three-month high near 1.1693 against the US Dollar on Thursday, extending Wednesday’s rally after the US Treasury Department said it would double the size of its bond buyback operations. The move pulled long-dated Treasury yields lower, dragging the Dollar to an 11-week low. Diverging central bank expectations added fuel: markets now price a European Central Bank rate hike in September, while the Federal Reserve is expected to hold steady.

Treasury Buyback Plan Weighs on Dollar

The Treasury confirmed on Wednesday it will at least double the maximum size of its liquidity-support buyback operations for 10-to-20-year and 20-to-30-year securities, raising the cap from $2 billion to $4 billion per operation starting September 9 and running through November 4. The 10-year Treasury yield fell to 4.64%, roughly 10 basis points below Tuesday’s peak, while the 30-year yield dropped from a 19-year high above 5.30% to near 5.20%. The US Dollar Index (DXY), which tracks the greenback against six major currencies, slid to a fresh 11-week low near 98.70 as the yield relief reduced the Dollar’s rate-driven appeal.

ECB Rate Hike Bets Build for September

Eurozone inflation pressure is reinforcing the Euro’s advance. A Reuters poll found the majority of economists surveyed expect the ECB to raise its deposit rate by 25 basis points to 2.50% at the September meeting, while the Fed is widely expected to leave rates unchanged in the same window. That policy divergence is central to the pair’s rally, since higher relative yields in the eurozone make the Euro more attractive to rate-sensitive capital.

• Eurozone final HICP inflation confirmed at 2.5% year-on-year for July
• The Fed is expected to hold rates steady at its September meeting
• 10-year and 30-year Treasury yields both retreated from multi-year highs this week

EUR/USD Technicals Point to 1.1800

EUR/USD trades at 1.1693, holding well above its 20-day exponential moving average near 1.1547, a position that keeps the near-term bias constructive. The Relative Strength Index near 74 signals overbought conditions that could slow further gains in the short run. Support sits at the 20-day EMA around 1.1547; a deeper pullback would need to break that level before further downside opens up.

On the upside, a stabilization above 1.1700 could clear the way toward May’s high near 1.1800. UOB Group analysts, who turned bullish on the pair on August 17 near 1.1570, now see scope for a move toward 1.1725 given the strength of the current momentum, and maintain a positive view as long as EUR/USD holds above 1.1600.

Conclusion

EUR/USD’s advance to a three-month high reflects two forces moving together: a Dollar under pressure from falling Treasury yields, and a Euro supported by hardening ECB rate-hike expectations. The pair’s next test is whether it can close decisively above 1.1700. A confirmed break would put May’s high near 1.1800 within reach; failure to hold above 1.1600 would undercut the bullish case built over the past week.