EUR/USD has already dipped on higher expectations for what Draghi has in store.
The team at BTMU sees further downward pressure and sets a new range for next week:
Here is their view, courtesy of eFXnews:
The euro is likely to remain under downward pressure against the US dollar heading into the ECB’s upcoming policy meeting in the week ahead, says Bank of Tokyo Mitsubishi (BTMU).
“Investor expectations for more aggressive ECB easing are building ahead of the meeting. A Reuters report speculating that the ECB may introduce a two-tier system for the deposit rate has reinforced expectations for a larger deposit rate cut than 10 basis points. The report has not been downplayed by the ECB suggesting that they are comfortable for the market to price in more negative rates.
We do not expect the ECB to disappoint market expectations for more aggressive easing at their upcoming meeting. Our short-term valuation model continues to signal that EUR/USD remains subject to downside risks in the near-term and will likely fall to new cyclical lows before year end.
In contrast the US dollar is poised to break higher with the Fed expected to soon begin raising rates. Confirmation of still solid US employment growth in November should reinforce upward US dollar momentum heading into the upcoming FOMC meeting,” BTMU projects.
BTMU sees EUR/USD trading in a 1.03-1.08 range in the near-term.
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