EUR/USD, USD/JPY, GBP/USD, USD/CAD: Merrill Lynch's end of year forecast

"The dollar has extended its rally since the June FOMC as the markets have integrated into pricing the greater likelihood of the Fed raising its key interest rates in September. The July press release has indicated that the bar was not high regarding a rate hike. The Fed just needs a little improvement in the labour market. Although the latest wage figures have not been conclusive, we continue to believe that the Fed will most likely act in September. Given that the risks from Greece and China are dissipating, the markets will again focus on monetary divergence, which is in favor of the dollar.

The next two NFP reports will be key. For today, we expect over 200,000 new jobs, which would support our scenario of a rate hike in September. As for Europe, our economists expect a more dovish ECB as inflation is still struggling to rise again.

Our forecast remains intact for the EUR/USD. We expect parity by the end of the year. For the USD/JPY and the GBP/USD, we expect prices to hit 125 and 1.49 respectively. And we are targeting 1.32 and 1.35 for the USD/CAD in 2015 and 2016, respectively," says Merrill Lynch.