EURUSD is trading around 1.1005 at the time of this writing, hitting the lower end of my repeatedly mentioned (for example here and here) 1.1000/1.1200 target zone. The post FED high was 1.1033 last night and may give some orientation intraday. The market expects an ECB rate hike of 50 basis points this afternoon to 3.00%. However, this interest rate would still be significantly lower than the policy rate set by the Fed at 4.75%. For perspective: the euro zone Harmonized Index of Consumer Prices (YoY) came in at 8.5% yesterday morning.
So even a key rate of 3.0% is still far too low, and I personally think the swan song to inflation is too early anyway. To that extent the euro may spike this afternoon in an initial reaction to print a new yearly high. But in the medium and long term I am sticking with it - spot rates between 1.10++ and 1.1200 are dollar buy levels. On the one hand the FED press conference was not as dovish as the statement. Powell has given himself room for further steps and the inflation issue may not be over on the other side of the Atlantic either. On the other hand, my expectations for the ECB are quite lower, especially given the ongoing eurozone periphery issues.
If I am right on the euro, the dip in the dollar index (DXY) should be over soon. Since September 28, the dollar is down almost 12% and the 100 mark could be tested in the near future. However, the index should not fall much lower, otherwise the 1.1200 in the euro would also be in danger.
Good luck,
Sebbo