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How to Trade the Euro's Rise

Thursday, 10 Jan 2013 | 4:18 PM ET
Mario Draghi, president of the European Central Bank (ECB), reacts during a news conference at the ECB headquarters in Frankfurt, Germany, on Thursday, Aug. 2, 2012.
Hannelore Foerster | Bloomberg | Getty Images
Mario Draghi, president of the European Central Bank (ECB), reacts during a news conference at the ECB headquarters in Frankfurt, Germany, on Thursday, Aug. 2, 2012.

How about that European Central Bank?

Investors were expecting no change in interest rates from the bank's monthly meeting, and the European Central Bank delivered. But President Mario Draghi went further, saying he expects conditions in the euro zone to begin gradually improving later in the year.

The euro rocketed upward on the ECB news—even though euro zone unemployment remains high and German industrial production is faltering. Kathy Lien, managing director of BK Asset Management, said she understands why.

"The central bank is done with introducing programs that have creative acronyms," she said. "OMT will be it." In other words, the bank is finished with stimulus programs like the sovereign bond purchases known as Outright Monetary Transactions, or OMT.

"What Draghi has done is he has thrown the ball back into the court of the politicians," Lien told CNBC's Scott Wapner. Lien argues that Draghi has now implicitly told euro zone politicians that it is up to them to develop programs to boost their economies. She expects the ECB to keep interest rates low, but she does not anticipate more euro-weakening stimulus moves.

(Read more on stimulus programs: Quantitative Easing: CNBC Explains)

Euro on the Rise
The euro jumps versus the dollar on comments from Mario Draghi. Kathy Lien, BK Asset Management, weighs in.

But now that the euro has shot higher, how do you trade it from here?

Lien thinks the euro has more room to run. She wants to wait for a dip to 1.3150, and then buy the euro against the dollar, setting a stop at 1.3050 and a target of 1.3300.

Your move.

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