The Euro has been on fire, and the EURUSD pair rose above 1.21 hitting May 2018 highs, mostly because of global USD weakness. 

Last week, the European Central Bank (ECB) increased its pandemic bond-buying program by 500 billion EUR, also extending its duration. Traders had been hoping for more, and as the ECB's decision was not dovish enough, the EURUSD rose noticeably, while precious metals fell. 

The 1.25 level is now a major psychological level and the major resistance for the euro as 2018 highs are located. From a technical point of view, if bulls push the pair above 2018 highs, the single currency could shoot up toward the 1.30 threshold. The last time it was there was in 2014.

That will, of course, be a major problem for Germany and other European countries, as they are export-oriented and they require a weak currency. Therefore, if the euro continues to strengthen, the ECB should start intervening, but how?

The Federal Reserve (Fed) is expected to loosen monetary policy at this week's meeting, potentially weakening the USD. 

It really looks like the only choice for the ECB to stop the euro from strengthening is helicopter money. As the European central bank is already monetizing a large portion of the government's debts, the next step to helicopter money should not be that hard. It only needs to think about how to do it without raising unrest. 

Overall, we think that the 1.25 level might be acceptable for the ECB as it is only 2-3% higher from current levels – and what choice does it have anyway? - but if the euro shoots through it and moves toward 1.30, the ECB will most likely start to act.