EUR/USD daily
Deutsche Bank came into the year positive on the euro and it's performed, rising to 1.10 from around 1.06 in late December. Now they say the "positive European story has now largely been priced in" and suggested taking profits.
Ultimately, they see EUR/USD rising to 1.15-1.20 but that rests on a pivot from the Fed.
"What are the relevant drivers? First, more evidence that US inflation is coming down allowing the US yield curve – a key indicator of dollar direction - to steepen even more, though its shape is already sending a bearish signal. Second, an ultimate validation of dovish Fed pricing from Fed communication itself."
They say the challenge in the coming months will be determining the nature and timing of the turn in the US cycle, as different scenarios will lead to varying degrees of dollar weakness. For now, taking profit on the euro long is recommended.
