Major winner McDowell put in the shade by Yorkshire's Parry
McDowell held the clubhouse lead on seven under with Jose Manuel Lara only for Yorkshireman Parry to overtake him with the joint-best round of the day.
The 23-year-old Challenge Tour graduate had a flawless round with five birdies to take top spot by one shot, but he admitted there was plenty of golf left to be played.
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Hide Ad"It's a bit early to be looking at leaderboards – we're only in the second round," said Harrogate's Parry, a Walker Cup team-mate of Rory McIlroy.
"It is a lead, though, so I'm happy going into the weekend in front. I'd always prefer to be in the lead than not."
A good finish at the Diamond Country Club should be enough to secure Parry's card for next season – something Lara is looking to achieve as well.
"I still feel young in myself, but there are many young Spanish guys coming up now and already have their cards," said the 33-year-old, who could not match his opening 66 as he signed for a 71.
"I need to fight this year and that's what I'm doing."
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Hide AdMcDowell, who is playing in his last event before next month's Ryder Cup, birdied four of his first five holes after starting on the back nine.
Having dropped a shot at the 17th he claimed it back at the next and followed up with nine successive pars.
"It's very much the old cliche of a game of two halves, this golf course," said McDowell. "This front nine's quite tricky and you've got to drive the ball unbelievably well to have any chance of making birdies.
"On the back nine it's a lot more three woods and hybrids off the tees which offers you a few more opportunities and I think the greens are a little flatter as well.
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Hide Ad"I think I'm two over par for the front nine and nine under par for the back nine overall so I certainly know where I need to make up some shots on the weekend."
Sheffield's Danny Willett, chasing his maiden tour victory, is only two shots off his county colleague Parry after a second successive 69.
Padraig Harrington, meanwhile, is champing at the bit for the Ryder Cup to arrive – and so, he suspects, is Tiger Woods.
For the first time in their careers the pair have needed wild cards after failing to qualify and with the match at Celtic Manor now less than two weeks away Harrington has spoken of the extra pressure that brings.
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Hide Ad"When you get picked you are under the spotlight more," said the Dubliner, controversially preferred to current world No 7 Paul Casey when he was without a Tour title for over two years and had not won any of his last nine cup games.
"You have something to prove, in many ways you're trying to justify it.
"There's definitely more pressure, but pressure brings a bit more adrenaline, more nerves, more focus. I'm into this well in advance – it's all about the Ryder Cup. I'm trying to hold myself back and I'm excited about getting into it.
"It definitely feels different."