Euro steadies above 1.1650 ahead of US PCE data

The EUR/USD pair flatlines near 1.1675 during the early Asian trading hours on Wednesday. The US Treasury's decision to expand its long-term bond buyback program could weigh on the US Dollar (USD) against the Euro (EUR). Traders await the release of US Personal Consumption Expenditures (PCE) Price Index data, due late Wednesday. 

US Treasury Secretary Scott Bessent said last week that the government could increase bond buybacks beyond $4 billion, a day after the department unveiled plans to double buybacks of longer-dated securities. CNBC reported earlier on Monday that Bessent could tap the department's near $1 trillion General Account to help fund bond buybacks, instead of issuing short-term bills.

"Lower bond yields at the long end won’t fix the debt problem. Longer term, it could make it worse. The government’s debt burden would become even more sensitive to changes in the Fed’s policy rate,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.

However, escalating tensions in the Middle East could boost safe-haven flows, supporting the Greenback. The US threatened to impose severe sanctions against any country or entity maintaining economic ties with Iran. Meanwhile, Tehran vowed retaliation against any country that took part in the US-led isolation campaign.

Euro support underpinned by yield spreads but upside seen as limited

Strategists at Scotiabank note that the “recent recovery in yield spreads has provided fundamental support to the Euro,” helping to underpin EUR performance. However, they caution that they “see little scope for additional near-term strength as spot currently trades with a slight premium to our narrow fair value estimate at 1.1622,” suggesting the currency may struggle to extend gains meaningfully from current levels.

Technical Analysis: EUR/USD maintains a positive outlook amid overbought conditions

In the daily chart, EUR/USD holds a bullish near-term bias as spot remains above the 100-day simple moving average (SMA) and the Bollinger middle band. Price is edging toward the Bollinger upper band resistance, while the Relative Strength Index (14) around 70 signals overbought conditions that could temper immediate upside, even as the broader structure stays supported.

On the downside, initial support is located in the 1.1580/1.1575 area, where the Bollinger middle band and the 100-day SMA cluster to reinforce an underlying floor, ahead of a deeper structural level at the Bollinger lower band near 1.1456. On the topside, a clear break above the Bollinger upper band resistance at 1.1708 would reopen the path for further gains, though stretched momentum suggests that rallies toward this barrier may attract profit-taking.