ECB will likely express caution around EUR exchange rate, DXY -0.11% poised for swing up (likely it's final one for this current business cycle) whilst focus will gradually shift over to potential March Rate Hike from FOMC. Allowing for USD to firm up modestly, pushing this pair down to around 1.16-1.19. Then as September nears and the end of ECB APP is signalled, a long term higher low forms and a break of this multi year ranging back from 2008
Historically, USD depreciates during a tightening cycle. This time is hasn't of a YET with Europe, Japan & UK converging with the FOMC on it's tightening path and we're seeing global synchronised growth. Capital flows will pile into Europe, the correlation between higher US yields & USD is already breaking down - a prescursor for whats yet to come & considering the DXY -0.11% long term and historical depreciation in tightening cycles, post Q2/Q3 downside risks for the DXY -0.11% are considerable. Upside for EUR significant. SO a long DXY -0.11% position play for a few months as this allows for a higher low to form (transition from 9 year to ) & DXY -0.11% to form a lower high & continue to the downside below 88
Target around 1.16 for now, short on break below support, possible retest of descending . From 1.16, personal expectations are for EUR to close out year above 1.26 provided external shocks to the economy do not materialise.