Forex Flash: EUR/USD holds neutral bias ahead - BTMU (Barcelona) - Bank of Tokyo Mitsubishi UFJ analysts are neutral EUR/USD and see spot moving between 1.2800 and 1.3150.

They note that the Euro has declined steadily against the dollar, fuelled in part by the increased optimism over the outlook for the US economy following the stronger than expected non-farm payrolls from the US and the retail sales report this week. However, they adds that next week is the FOMC rate decision which will be followed by a press conference by Chairman Bernanke. They write, “Coming so soon after the semi-annual testimony to Congress, we probably won’t have any dramatic change in stance from Bernanke, but nonetheless, it will be a valuable opportunity for the Fed to emphasise that despite some stronger than expected data, the need for monetary stimulus will be continue for some time yet.

They finish by writing, “He is likely to repeat his concerns over fiscal gridlock following the divergent budget plans presented in Congress this week will which highlight again the potential problems that lie ahead. We get the advance PMI readings from the euro-zone also next week and there is a decent chance these readings show some further improvement in confidence, albeit only modestly.”

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