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Forex Flash: EUR/USD looks bullish ahead - BTMU

Bank of Tokyo Mitsubishi UFJ analysts are bullish on EUR/USD for the week ahead and see spot moving between a range of 1.2650-1.3000.

The begin by commenting that the euro has declined notably with Cyprus and Italy in focus raising concerns over disruptive capital flows within the euro-zone in the aftermath of the haircut on deposits in the top two Cypriot banks. However, they anticipate that the focus to shift away from Cyprus and for fears over a negative fallout to recede, thus helping to support the euro. They write, “We may also get some movement toward the Italian president appointing an interim prime minister which would alleviate fears over political uncertainty in Italy.”

They feel that the ECB will be the key event from Europe and we would expect President Draghi to be quite clear in expressing optimism that improving financial market conditions will continue despite the Cyprus uncertainty. They add, “Of course, the weak PMI readings will have to be acknowledged by Draghi, we do not expect any signal of a rate cut yet, which should further support the euro next week.”

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