Investing.com – The euro has had a relatively mighty July against the U.S. dollar, but BCA Research predicts tough times ahead for the eurozone and advises investors to sell the single currency.

At 08:50 ET (12:50 GMT) it was trading at 1.0818, down 0.4% on the day but up about 1% over the past month.

Despite gains in the EUR/USD pair, BCA Research suggests that investors adopt a defensive stance towards European assets as it foresees the possibility of an impending recession.

In early June, it cut interest rates, ahead of the US Federal Reserve and the Bank of England, and monetary policy is expected to ease twice more this year.

However, analysts at the Canadian investment research firm said in a July 29 note that two additional rate cuts this year, priced in, would be too little too behind schedule.

“The eurozone is heading towards recession. It is too vulnerable. Hence, a shock from the US or China would easily trigger a fall in output and an increase in unemployment,” BCA Research said.

The BCA says the ECB interest rate cuts that investors have priced in this year will not be enough to prevent a recession, as investment spending and gross domestic product have historically fallen significantly after central banks started cutting interest rates.

“Europe is already showing internal weaknesses. The private sector is spending a growing percentage of its income on debt servicing, while construction activity is falling, bankruptcies are rising and the job market is stagnating,” the BCA said.

Any foreign shock could trigger a recession in this feeble economy, and foreign threats abound: The United States is nearing recession, China’s economy is slowing and emerging markets are delicate.

Investors should “adopt a defensive stance; prefer bonds to stocks and defensive names to cyclicals. Sell EUR/USD,” BCA said, seeing the currency pair fall towards parity.