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How Italy's Election Could Move the Euro

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Italian politics always make an excellent spectator sport — and the current national race is no exception.

With a strong center-left candidate, a comedian, current Prime Minister Mario Monti, and former Prime Minister Silvio Berlusconi all in the running, the outcome of the February 24 and 25 election is far from certain. Many experts think there may be no decisive winner — a scenario bound to be unsettling, not least since Berlusconi is vowing to undo the reforms enacted by Monti, a technocrat elected to bring Italy back from fiscal disaster.

So far, euro traders don't seem overly concerned, though. How should you play the Italian uncertainty?

It's complicated.

Kathy Lien, a managing director at BK Asset Management, is looking to short the euro. "The elections are getting ugly," she told CNBC's Melissa Lee, pointing out that Monti recently called Berlusconi a buffoon — in public. She thinks the no-clear-majority outcome is the most likely.

But Brian Kelly of Shelter Harbor Capital has a different approach. "Watch the euro reaction after the election," he says. If Berlusconi wins,and the euro goes up, "that to me would be a positive test of my thesis that we're getting a new Deutschemark in the euro, and that ultimately the markets think Italy's going to leave." Kelly recommends sitting tight ahead of the election.

Andrew Busch, publisher of AndrewBusch.com, suggests watching Italian 10-year bonds, since "that's where you will see the pain first."

"It's Italy. Anything can happen," Busch said.

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