The rallied modestly off the back of a more hawkish European Central Bank (ECB), argue analysts at TD Securities. They think EURUSD is likely to respect the 1.12/14 range into year-end, with the "risk of slippage below 1.12 non-trivial next year".

Key Quotes: 

“There is probably not enough here to change strategic short positions in EUR. EUR/crosses could see some unwind but ultimately contained. At the end of the day, Lagarde is still committing the EUR to being the most liquid and largest funder next year. Tactically, we're not reading much into price action as we think investors are just hoping to get to year-end after a volatile Oct/Nov. EURUSD likely consolidates; we have highlighted 1.12/14 as the likely range and within that, 1.1385 will be a key resistance marker. Above the range, downtrend resistance established from the May highs comes in around 1.15. This could be the capitulation point for EUR shorts.”

“Given the cyclical forces at play, the USD still seems to be the currency to beat next year. A faster taper by the Fed also means the TIPS market loses a big buyer of 10Y equivalents. That means that US real rates are likely to rise faster than their German counterparts, leaving another key anchor, alongside 1y1y rate spreads, capital divestment and inferior carry as key anchors for EURUSD early next year. As such, we think 1.12 in EURUSD is vulnerable to break then.”