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No Looniness for the Loonie—or the Euro

From Portugal to Ireland, nothing has dented the euro's surprising strength. And in Canada, even a no-confidence vote hasn't really jarred the Canadian dollar . Here's how to trade them.

You would think that something—a meeting of European leaders, or a collapsing Portuguese government, or conflicting demands from Ireland and Germany—would have dented the euro this past week. But other than some mild fluctuations, the single currency sailed through a very eventful five days, said Rebecca Patterson, global head of currencies and commodities for J.P. Morgan's private bank.

"The story with the euro this week wasn't that it had a big move. It was that it didn't do anything despite all the news," Patterson told CNBC's Melissa Lee.

Why the resilience? Traders are expecting significant interest rate hikes this year—Patterson said the market has priced in 100 basis points of increases—and economic indicators for the region are gradually improving. The bottom line: just about any news seems to be good news for the euro, at least right now.

AP

The Canadian dollar proved almost equally resilient today despite a no-confidence vote for the prime minister, and both Patterson and Andrew Busch, global currency and public policy strategist for BMO Capital Markets, told Lee.

Despite some weakness in the loonie right after the vote, "No one expects this to really throw them off track of balancing the budget by 2015," he said. "This is why we love Canada as far as a currency and a country." The opposition politicians are opposed to having a lot of cross-border mergers and acquisitions, and there is a slight chance some deals could be hampered, Busch said. But in his view, if that chance creates some CAD weakness, that would be a buying opportunity.

Busch recommends trying to buy Canadian dollars at about 99.70 with a stop loss about 100 points above that, and taking profits about 100 points below.

Oil will also bolster the Canadian dollar, Patterson said. "This is an economy that produces and exports a ton of commodities," she told Lee. It's a great fundamental story..That's where Canada gets very different from Portugal."

You can watch the discussion right here.

CURRENCY FUTURES

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