Credit Agricole says it's too soon to sell EUR/USD

EUR/USD is up 130 pips this week

It's down 33 pips to 1.0950 today.

Here's what Credit Agricole has to say about the euro:

"The EUR has been well supported of late, regardless of strongly capped monetary policy expectations. It seems that for now risk sentiment is a more important currency driver than rate expectations. This is especially true when considering that the EUR has been widely used as a funding currency during the last few weeks and months.

In the very short-term further position-squaring related upside risk cannot be excluded as tighter monetary conditions as driven by the Fed and intact uncertainty as related to China may keep risk sentiment unstable. Most recent China PMI releases keep investors' growth expectations strongly muted. However, from a broader angle, we expect risk sentiment to stabilize anew. This is mainly due to the notion that further improving growth prospects should ultimately compensate for rising Fed rate expectations.

Elsewhere, a further appreciating EUR would increase downside risks to inflation and that may trigger a more aggressive rhetoric by ECB members.

As a result to the above outlined conditions we remain in favour of selling EUR rallies towards 1.1100- 1200."

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