EUR/USD: Credit Agricole revises its forecast but remains bearish in the medium-long term

In an analysis published today, Credit Agricole announced a revision of its short-term forecasts for the EUR, which is now expected to increase, due to the risk aversion forecasts linked to China.

"We believe that the positive correlation between risk aversion and the EUR will maintain the single currency in an upward direction in the short term.

The resilience of the currency should be especially strong in relation to the USD, as our economists have postponed their Fed rate increase forecast from September to October. From here to the end of the year and early 2016, however, we expect monetary policy divergence to remain a major theme.

The strength of the euro coupled with the slowdown in global growth and the decline in commodity prices are expected to increase the chances that the ECB's QE continues beyond September 2016, which will make the euro an even more attractive financing currency.

We are now targeting 1.12 on the EUR/USD at the end of Q3 2015 and 1.06 by the end of the year and 1.04 by the end of Q1 2016."