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Forex Flash: EUR/USD has a neutral bias – BTMU

FXstreet.com (Barcelona) - Bank of Tokyo Mitsubishi UFJ analysts are neutral on EUR/USD and see spot ranging between 1.2750 and 1.3050.

They note that the euro is attempting to break lower against the US dollar with EUR/USD falling back below the 1.30-level over the past week and add that key support for EUR/USD is located between 1.2650 and 1.2750 which if broken could lead to an accelerated sell off. They write, “The euro is being undermined by building expectations of further ECB monetary easing driven by prolonged recessionary conditions in the euro-zone and the weaker than expected euro-zone Q1 GDP reports have reinforced ECB easing expectations.”

However, they feel that the more forward looking PMI surveys for May released in the week ahead will likely have a greater impact upon shaping the ECB’s policy outlook ahead. In contrast the US dollar is deriving support more broadly from building investor expectations that the Fed will taper the pace of QE purchases in the second half of 2013 which is lifting real yields in the US. They finish by writing, “The release of the latest FOMC minutes and Fed Chairman Bernanke’s testimony will be closely scrutinized to assess how close the Fed is to paring back monetary easing in the near-term.”

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