EUR/USD targets 1.20 as SocGen says Treasury policy keeps USD undervalued

Societe Generale argues the US dollar is trading weaker than fundamentals justify, with Treasury and fiscal policy the dominant drag on the DXY index rather than rate differentials. The bank expects EUR/USD to hold above the 1.12 area on pullbacks and eventually extend toward the 1.20 objective, framing dips as buying opportunities within a structural dollar downtrend. The view rests on persistent US fiscal expansion, heavy issuance needs and a policy preference tolerant of a softer currency, factors that discourage foreign reserve and portfolio allocation into dollar assets even when US growth data outperforms. For traders, the call implies selling dollar rallies against the euro and other majors, with 1.12 acting as key structural support and the psychological 1.15 handle a likely staging area en route to 1.20. Near-term risk to the thesis comes from Wednesday's July PCE inflation print, where a hot core reading could trigger a hawkish Fed repricing and a corrective dollar bounce. A decisive close below 1.12 would invalidate the medium-term bullish structure.