EUR/USD: CA says that pair should continue to fall to 1.04 zone, but probably won't drop to parity

In a note published today, Credit Agricole announced that despite yesterday's rise, the bank still believes that the pair will quickly test the latest annual lows, and even accentuate its decline to 1.04, amidst a persisting background of monetary policy divergence between Fed and the ECB.

"The growing demand for the euro as a funding currency should play a key role since borrowers are turning away from the dollar in anticipation of higher US rates.

However, the EUR/USD is expected to have trouble falling to parity at this time, since the strongest forex movements remain in the hands of Yellen and/or Draghi. Moreover, the risk aversion that could be spurred by higher US rates could support the EUR."