Forex Flash: EUR/USD has a neutral bias ahead - BTMU

Bank of Tokyo Mitsubishi UFJ analysts are neutral on EUR/USD´s prospects ahead and feel that the pair will range between 1.3150-1.3550.

They note that the Euro has stablilised over the past week following last week’s comments from ECB President Draghi which attempted to dampen further upside momentum. They also feel that investor uncertainty heading into the Italian elections is also helping to dampen upside potential.

They note that it was revealed that the Eurozone economy contracted more sharply than expected in the final quarter of last year and while the data is somewhat backward looking with leading indicators pointing towards an easing of the pace contraction in early 2013, it still serves to highlight that the euro-zone economy continues to remain very weak limiting its ability to deal with a strengthening euro.

The team note that the latest PMI business confidence surveys for February will be released in the week ahead and will shed further light upon whether the pace of economic contraction in the euro-zone continues to ease. They finish by writing, “However despite the ongoing under-performance of the euro-zone economy, the ECB’s monetary policy stance is still tightening modestly as its balance sheet contracts placing upward pressure upon the euro in the near-term.”