EUR/USD Breaks Higher as Falling Treasury Yields Weigh on Greenback

Traders' Opinions

Summary:

EUR/USD surges above 1.1700 as expanded US Treasury bond buybacks pressure yields and hammer the Dollar. Despite hawkish Fed Minutes, falling US yields leave the Greenback vulnerable and keep the Euro’s recovery firmly in play.

BUY EURUSD

EXP

PENDING

1.17000

Entry Price

1.18500

1.15500

1.16851 +0.00076 +0.07%

Pips

PENDING

1.15500

Exit Price

1.17000

Entry Price

1.18500

The Euro is extending its recovery against the US Dollar on Thursday, with EUR/USD pushing back above 1.1700 after gaining more than 1% from Wednesday’s lows. The move is being driven primarily by renewed pressure on the Greenback after the US Treasury announced a significant expansion of its long-term government bond buyback programme.

Beginning September 9, the Treasury plans to double the maximum size of liquidity-support buybacks for longer-dated securities to at least $4 billion per operation, compared with the current $2 billion ceiling. The move is intended to improve liquidity and ease pressure at the long end of the Treasury market after concerns surrounding the US fiscal position pushed yields higher.

Those concerns intensified after US government debt climbed beyond $40 trillion, increasing the premium investors are demanding to hold longer-dated US securities. By expanding buybacks, the Treasury is effectively attempting to relieve some of that pressure, but the currency-market consequence has been a sharp decline in the Dollar.

The development is particularly important because lower long-term Treasury yields reduce one of the Dollar’s key sources of support. There is also a broader confidence issue emerging. The combination of Treasury intervention in the bond market and recent US-Japan coordination surrounding the Yen could encourage foreign investors to reconsider their exposure to US assets, potentially through Treasury sales, Dollar selling, or both.

In my view, this leaves the Dollar increasingly vulnerable even if the Treasury succeeds in stabilising the bond market. Lower yields may solve part of the problem in Treasuries, but they simultaneously weaken the relative yield advantage that has supported the Greenback.

Interestingly, the move has overshadowed what was otherwise a relatively hawkish set of Federal Reserve Minutes. Policymakers indicated that additional rate increases could still be required if inflation fails to moderate sufficiently. Normally, that message would offer the Dollar some support, but the market’s reaction suggests that Treasury developments are currently carrying considerably more weight.

For EUR/USD, the shift has changed the immediate momentum decisively in favour of buyers. With the pair reclaiming 1.1700, continued weakness in US yields and the Dollar could leave the Euro positioned for another extension higher.

Technical Analysis

EUR/USD has undergone a clear structural shift on the 4-hour chart, with the pair breaking out of the broader descending channel that controlled price action through much of May, June and July. Since that breakout, the market has developed a sequence of higher highs and higher lows, showing that buyers have taken control of the short-term trend.

The latest advance has now pushed EUR/USD into the 1.1670–1.1700 resistance region, an area that previously acted as a significant supply zone. Price has already traded above 1.1700, and after such a sharp move from the 1.1550 region, some consolidation or a modest pullback would not be surprising. Importantly, however, I would view a controlled retracement into 1.1660–1.1680 as a potential retest of the breakout rather than an immediate bearish reversal.

What stands out to me is the strength of the recovery since the pair reclaimed 1.1500. Buyers have consistently stepped in on relatively shallow corrections, while former resistance levels have gradually turned into support. This suggests the market is no longer simply correcting the previous decline but is beginning to establish a more convincing bullish structure.

If the 1.1660–1.1680 region holds, I expect buyers to make another attempt above 1.1700. A sustained breakout would leave relatively little technical resistance immediately overhead and could expose 1.1760, followed by the major 1.1840–1.1855 resistance zone highlighted on the chart.

On the downside, a decisive move back beneath 1.1660 would weaken the immediate breakout and could trigger a deeper correction toward 1.1580–1.1550. The more important structural support remains around 1.1490–1.1510. As long as EUR/USD remains above this region, the broader recovery remains technically intact.

For now, my bias remains bullish, but after the aggressive move higher, I would prefer buying a retest rather than chasing the pair at current levels. Holding above the former 1.1670 resistance would strengthen the argument that the breakout is genuine and keep 1.1850 firmly in focus as the next major upside objective.

TRADE RECOMMENDATION

BUY EUR/USD

ENTRY PRICE: 1.1700

STOP LOSS: 1.1550

TAKE PROFIT: 1.1850

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Risk Disclosure

The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

No decision to invest should be made without thoroughly conducting due diligence by yourself or consulting with your financial advisors. Our web content might not suit you since we don't know your financial conditions and investment needs. Our financial information might have latency or contain inaccuracy, so you should be fully responsible for any of your trading and investment decisions. The company will not be responsible for your capital loss.

Without getting permission from the website, you are not allowed to copy the website's graphics, texts, or trademarks. Intellectual property rights in the content or data incorporated into this website belong to its providers and exchange merchants.

Recent Searches

Top Searches

Markets

Analysis

User

24/7

Economic Calendar

Education

Data

EUR/USD Breaks Higher as Falling Treasury Yields Weigh on Greenback

Technical Analysis

Risk Disclosure