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

The Euro (EUR) reached a fresh three-month high of approximately 1.1693 against the US Dollar (USD) during Thursday's European trading session. This surge in the Euro occurred as the US Dollar experienced a decline, primarily due to a drop in US long-dated bond yields following the Treasury Department's announcement to intensify its bond-buying program.

Danske Bank analysts noted that the EUR/USD pair "spiked higher" after the US Treasury increased its buyback volumes of longer-dated Treasury bonds, coinciding with a flattening of the US yield curve. The 10-year Treasury yield, currently at 4.64%, is 10 basis points below its peak reached on Tuesday. Although the adjustment in US yields has only partially impacted Europe, the primary market in the region has seen substantial activity in SSA and covered bond deals.

Meanwhile, the US Dollar Index (DXY), which measures the Greenback's strength against six major currencies, hit a fresh 11-week low near 98.70 during the European trading session. The US Dollar faced its weakest performance against the New Zealand Dollar. In the Euro zone, market expectations are that the European Central Bank (ECB) will raise interest rates at their September meeting, while the Federal Reserve (Fed) is anticipated to maintain them steady during the same period.

EUR/USD trades at 1.1693, having surpassed the 20-period exponential moving average (EMA) at 1.1547. This position above the short-term trend indicator indicates a positive near-term outlook. However, the Relative Strength Index (RSI) at 73.98 suggests overbought conditions that may limit upside in the very short run. Support for EUR/USD is currently at the 20-day EMA, located at around 1.1547, where a pullback would likely be tested before any significant correction.

Should the pair stabilize above 1.1700, it could reach May's high of approximately 1.1800. Analysts at UOB Group remain cautiously optimistic about the Euro's near-term prospects, noting that the currency "turned positive on Monday," indicating "an upside bias." Despite this positive outlook, UOB Group requires EUR to break and hold above 1.1615 before anticipating a move to 1.1655 and beyond.

This condition was met yesterday, with EUR rallying to 1.1679 and closing at a three-month high of 1.1677, marking an increase of 0.89%. UOB Group is optimistic about further upside potential for EUR, projecting that the currency could reach 1.1725, as long as it remains above the previously identified strong support level of 1.1525.