The Treasury’s intention to take control of Treasury yields has revived the “Sell America” strategy. Meanwhile, bond yields have rebounded sharply. Will the US dollar follow suit? Let’s explore this question and develop a trading plan for the EUR/USD pair.
The article covers the following subjects:
Major Takeaways
- The US bond market has rebounded quickly.
- The US economy remains strong.
- The “Sell America” strategy is weighing on the dollar.
- Short positions on the EUR/USD can be considered below 1.167.
Weekly Fundamental Forecast for Dollar
Bond markets are exceptionally powerful these days. They forced Italian Prime Minister Silvio Berlusconi to resign in 2011. Eleven years later, the same story repeated itself with Liz Truss in Britain. Finally, the 2025 panic in the debt market forced Donald Trump to abandon his plan to impose massive tariffs, replacing them with more moderate measures. Fighting such a behemoth is not the same as throwing a lifeline to the Japanese yen. These parallels are crucial for understanding the future dynamics of the US dollar.
Yields on 30-year US Treasuries quickly returned to the levels seen before the Treasury Department announced that it would increase the minimum purchase size to $4 billion per transaction. This happened despite Scott Bessent’s statement that the Treasury has more than enough tools to bring borrowing costs down. The Treasury Secretary attributed the rise in yields to temporary budget-deficit pressures. However, what if yields are rising because of the strength of the US economy?
US Composite PMI
Source: Bloomberg.
In August, the US Composite PMI jumped to 56, its highest level since April 2022, driven by stronger demand and improving business expectations that fueled a surge in hiring. Bloomberg analysts raised their forecast for US GDP growth in the third quarter from 2% to 2.5%, citing stronger investment—including in artificial intelligence—and resilient consumer spending. Conditions in Europe are also improving. The eurozone Composite PMI rose to 52.1 in August, beating expectations and reaching its highest level since November. However, this alone is hardly enough to justify such a strong surge in EUR/USD quotes.
Euroarea PMIs
Source: Bloomberg.
The root of the problem lies in the revival of the “Sell America” strategy, which had faded from view since the spring of 2025. In both cases, the strategy was triggered by the US administration’s attempts to override market forces. Donald Trump sought to reshape global trade through tariffs to improve the US trade balance, while Scott Bessent challenged the Treasury bond market. Such moves are prompting investors to seek refuge in assets associated with decentralized finance. It is no surprise that gold and Bitcoin are shining.
The US dollar is being pulled in two directions. On the one hand, the “Sell America” strategy is clearly negative for the greenback, as events in the spring of 2025 demonstrated. On the other hand, the parallels with the Japanese yen suggest that EUR/USD bears may still have a chance to recoup their losses.
Treasury yields quickly returned to the levels seen before the Treasury announced its plans to increase buybacks. Similarly, the USD/JPY swiftly recovered after Japan’s verbal interventions. Most likely, the US dollar will follow the same pattern.
Weekly Trading Plan for EUR/USD
Selling the EUR/USD from the 1.17 level was the right decision. If the major currency pair breaks through the 1.167 support level, it could provide an opportunity to add to short positions.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.
According to copyright law, this article is considered intellectual property, which includes a prohibition on copying and distributing it without consent.
