The following is EUR/USD range and outlook for next week as provided by Bank of Tokyo-Mitsubishi UFJ (BTMU).

EUR/USD – BEARISH BIAS – (1.2250-1.2600)

The euro has staged a modest relief rally against the US dollar following today’s ECB monetary policy meeting. The euro rebound appears to mainly reflect some disappointment that the ECB did not deliver further easing at today’s meeting.

However, the scope for the euro to rebound in the near term appears relatively limited given that the ECB did signal that it will consider implementing further monetary easing measures in early 2015. It still appears more a matter of time before rather than if the ECB delivers more easing which increasingly is expected to take the form of QE.

The case for a stronger US dollar is also likely to remain in place dampening further EUR/USD upside potential. The release of the latest non-farm payrolls report for November is expected to reveal another solid gain in employment while the unemployment rate continues to move closer to the Fed’s longer-run goal supporting Fed rate hike expectations in 2015. Year-end positioning flows present the main upside risk for EUR/USD in the near-term.

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