EUR/USD: Credit Agricole bank gives Greek update and concludes that shorting the pair is the best bet

"The Greek government encourages its citizens to vote 'no' in a referendum on Sunday and rejects the austerity measures submitted by the Troika in exchange for support of its economy. For Alexis Tsipras, a "no" vote would strengthen its position in the negotiations and this would not be synonymous with a Grexit.

In response to the referendum, the Eurogroup rejected Greece's proposals. The ECB decided to keep the ELA programme at the same level as last Friday, which forced the government to close banks and financial markets and implement capital controls. In the short term, the ECB could be forced to reduce the collateral eligible by the banks after the Greek default to the IMF but a total end of the ELA programme seems unlikely as long as there is a reasonable chance that an agreement will be reached.

We believe that the issue of Grexit is not yet on the table. With no available mechanism, the Eurogroup can simply increase the pressure on the Greeks so that they then put pressure on their governments to reach an agreement that would prevent financial instability. A "yes" vote could simplify the obtention of a long-term agreement while a "no" vote would lead to a dramatic escalation. The Grexit scenario is not yet on the table for now as none of the stakeholders has put Greece's euro membership in the balance. We therefore believe that a Grexit can and should be avoided whatever the outcome of the referendum.

We remain bearish on EUR/USD with a goal of parity", says Credit Agricole.