Trading the Euro's Wild Ride
If you got whiplash watching the euro last week, you have good reason.
The common currency's wild ride higher after the European Central Bank meeting was such a sharp change from the doomsday talk surrounding the currency just six months ago that it left Andrew Busch, a currency strategist and CNBC contributor, "almost flabbergasted."
True, Busch says, there was plenty of good news for the currency to move on. "Everything broke euro's way, from Japan to you name it, and this is as good as it gets for the currency."
The rapid rally, though, leaves investors with a quandary: is there more room for the euro to run?
"Temper your expectations," says Kathy Lien, a managing director at BK Asset Management. "There's a lot to be worried about."
The euro zone economy is hardly robust. Unemployment is at a record high at 11.8% and Germany just reported disappointing levels of industrial production. "Growth is really not there," Lien says.
At the same time, though, financial strains have eased, thanks in large part to actions by the European Central Bank, and sentiment is starting to improve.
So Lien recommends buying the euro - carefully. If you're not long the currency now, she says, wait for a dip against the dollar to 1.3250. Then buy the euro with a stop at 1.3100 and a target of 1.3400. It's "not the best risk-reward," she told CNBC's Melissa Lee, "but I don't expect a huge amount of upside here." On top of the fundamental challenges for the currency, there is technical resistance at 1.3500, Lien says.
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