Forex Flash: EUR/USD forecast ahead looks neutral – BTMU (Barcelona) - Analysts at the Bank of Tokyo Mitsubishi UFJ have taken a neutral view of the pair for the week ahead.

They believe that the Euro is struggling for direction like most other currencies heading into year end, with EUR/USD still consolidating between 1.27-33. They don´t anticipate that the current trading range will be broken in the week ahead and the Euro is likely to trade on weaker footing following the dovish outlook presented by the ECB at today´s policy meeting where staff projections for both growth and inflation were revised lower.

They team note that Draghi left the door open for further monetary easing with the mid-point for inflation in 2014 set below target at 1.4%. However, USD is also likely to be undermined in the week ahead when the Fed presents its latest economic projections which are likely to support the Fed´s decision to maintain low rates until mid-2015. They also feel that it is likely that the Fed will announce that when Operation Twist expires at the end of the year, it will continue to purchase USD 45bln per month of long term USTs, resulting in the Fed´s balance sheet expanding by USD85 bln per month by the start of 2013, rather than the current level of USD 40bln.