How to Use Currencies to Trade the Commodity Selloff

Monday, 27 Jun 2011 | 11:31 AM ET
Norwegian Oil Rig
Source: olf.no
Norwegian Oil Rig

Crude oil got hammered last week. Here's how to trade that move using currencies.

That was quite a week for crude oil, wasn't it? If you were long crude, you were feeling some pain. You might want to try using currencies to trade on commodity moves.

"There's a number of currencies out there where the underlying economies are big commodity exporters," says Rebecca Patterson, chief markets strategist for J.P. Morgan Asset Management. "If you want to play a commodity, take a look at the country. If they're a big exporter of a commodity, there might be a currency trade there that's more liquid and therefore cheaper to do."

Money Match Up
Greeks vote on austerity next week. The fate of the euro, and Greece, rests on their actions. Also, Mike Darda, MKM Partners, discusses Europe's ongoing pains, and a a look at how to use currencies to profit from commodities getting hammered, with CNBC's Scott Wapner and the Money in Motion traders.

Patterson has been taking a look at the currencies of oil exporters, she told CNBC's Scott Wapner, and she sees potential in the Norwegian krone.

Norway is a big oil exporter, Patterson points out, and she expects the central bank to raise interest rates again in September. Meanwhile, the country has a significant current account surplus, which "makes it a safe currency in a scary world," she says.

That said, Patterson thinks oil prices could fall further, so she recommends waiting for a dip to buy the Norwegian krone against the dollar. She wants to buy the krone around 5.6, put a stop loss at 5.73, and look for a move to 5.3.

You can watch the discussion in the video clip, starting at 8:10.

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm.

"Money in Motion Currency Trading" repeats on Saturdays at 7pm.