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Crédit Agricole's bespoke short-term trading model is buying the Euro against the Dollar this week, just as the exchange rate approaches parity.

The Euro to Dollar exchange rate (EUR/USD) is quoted at 1.0005 at the time of writing and today's low is currently quoted at 1.001, meaning a significant moment for the foreign exchange market is approaching.

The world's most liquid and heavily traded currency pair could however end the week higher than here, according to Crédit Agricole's FAST FX model.

"EUR/USD’s plunge has outpaced the move lower in its fair value and the exchange rate has become more than two standard deviations undervalued," says Valentin Marinov, Head of G10 FX Strategy at Crédit Agricole.

"So, the FAST FX model has triggered a buy EUR/USD trade," he adds.

The FAST FX model boasts a hit rate of 60% and is up 6.73% over the course of the past year.

This is an astounding return for a short-term trading model.

The model serves as something of a contrarian indicator and made 1.51% last week being short EUR/GBP.

"EUR/USD’s fair value has declined from 1.0635 to 1.0517. Uncertainty about how aggressively the ECB will hike rates and whether or not its anti-fragmentation tool will be ready by the central bank’s 21 July meeting led to a fall in the Eurozone-US short-term rates differential as well as widening peripheral sovereign yields vs Bund yields," says Marinov, explaining why the Euro is under pressure.

But, "EUR/USD’s plunge has outpaced the move lower in its fair value and the exchange rate has become more than two standard deviations undervalued," he adds.

A take profit level is set at 1.0517 for the trade.