EUR/USD's Overbought Momentum Rises as ECB Hike Looms

The EUR/USD pair has reached a fresh three-month high at 1.1711, but its overbought momentum raises concerns about a near-term pullback.

The euro has gained 2.50% in the past month and 0.62% in the past year, while the dollar index hit an eleven-week low of 98.70 on Thursday.

The catalyst for this move was not European, but rather a collapse in long-dated Treasury yields following the US Treasury's announcement to double the size of longer-dated debt repurchases.

This has led to a policy reversal, with market pricing assigning an 84% probability to a 25 basis point European Central Bank hike on September 10, taking the deposit rate from 2.25% to 2.50%.