As you can see in the chart the DE10Y-US10Y spread has been falling for some time already. The US 10 year yield continues to rise as the USA post better economic data compared to the EU and seem to be in for an earlier recovery from lockdowns as compared to europe. It stands to reason that the higher yield for US 10 year bonds vs. the lower yield for german 10 year bonds gives a good indication for more dollar strength to come. A target of around 1.14 for the EUR/USD seems reasonable. A rising DE10Y-US10Y spread would invalidate this view.
Comment:
So far the trade has played out well and since then the DE10Y-US10Y spread has continued to fall while Europe is facing a third wave of covid and a mostly closed and slowly or not at all recovering economy. We are likely to see more downside and I am staying short.