Euro steadies above 1.1650 ahead of US PCE data

The Euro remained stable around 1.1650 against the US Dollar ahead of the release of US Personal Consumption Expenditures (PCE) Price Index data on Wednesday. The US Treasury's decision to expand its long-term bond buyback program could negatively impact the US Dollar (USD) relative to the Euro (EUR). Traders are eagerly awaiting the PCE data, which is due late Wednesday.

US Treasury Secretary Scott Bessent hinted at increasing bond buybacks beyond $4 billion, after the government had previously announced a doubling of buybacks for longer-dated securities. However, lower bond yields at the long end might not solve the debt issue; they could potentially worsen the situation, making the government's debt burden more sensitive to changes in the Fed's policy rate, according to Brian Jacobsen, chief economist at Annex Wealth Management.

Escalating tensions in the Middle East could boost safe-haven flows, benefiting the US Dollar. Scotiabank strategists noted that the recent recovery in yield spreads provided fundamental support to the Euro, but they do not expect the currency to make further gains in the near term, as it is currently trading slightly above their narrow fair value estimate of 1.1622.

The EUR/USD pair is showing a bullish near-term bias, as it remains above the 100-day simple moving average and the Bollinger middle band, but it is approaching the Bollinger upper band resistance, indicating potential overbought conditions. Support is expected at the 1.1580/1.1575 area, with a deeper structural level at the Bollinger lower band near 1.1456.

A break above the Bollinger upper band at 1.1708 could open the door for further gains, though stretched momentum suggests profit-taking may occur.