EUR/USD Breakout Puts Dollar Pressure Valve in Focus
The recent EUR/USD breakout has put pressure on the dollar, according to City Index UK. The US Treasury's announcement of larger buybacks for long-term debt hints at yield suppression and raises questions about fiscal sustainability.
The US public debt has surpassed $40 trillion, with debt held by the public reaching 100% of GDP. Primary deficits remain large, and net interest costs are climbing. This could lead to a rise in yields as investors demand greater compensation for absorbing the supply of US debt.
However, if the Treasury continues to intervene, it may restrict one of the prices through which adjustment can occur. Instead, pressure may shift from bonds into the dollar. The 10-year spread between US and German yields has narrowed to 139 basis points, making the dollar less attractive.
The technical picture favors a bullish bias for EUR/USD, with oscillators indicating long setups over shorts. However, reversal risks are present, particularly if the pair moves back beneath 1.1670 and holds there.