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Worried About U.S. Markets? Euro Zone Will Make You Feel Better

You could get motion sickness watching the U.S. markets these days. But the real sick man is Europe.

It's certainly upsetting to watch U.S. stocks tick steadily downward, or lurch around in a volatile mishmash. But for real problems, Europe is the place to be right now.

Spanish and Italian bond yields rose so high recently that the European Central Bank felt compelled to move in. It's now buying bonds in a determined attempt to bring some stability back to the markets. But at the end of the day, says Jens Nordvig, head of G10 foreign exchange strategy at Nomura, "The amounts needed may be huge, given the very large rollover needs in Italy and Spain." And since the central bank does not have the kind of funding Nordvig thinks is needed, "the ECB is in a very awkward position," he wrote in a note to clients.

What does this mean for the euro? Nothing good, Nordvig says, noting that the euro fell against both the Swedish krona and the Norwegian kroneduring Monday's market turmoil - conditions that usually lead the euro to strengthen against peripheral European currencies. The price action, he says, "signals a shift in the perceived risk characteristics of the Euro versus other European currencies."

Nordvig has been recommending selling the euro against the Swiss franc, and he now suggests selling the euro against other currencies, like the Norwegian krone, as well. "The break in correlations on Monday may be a signal of what is in store over the coming weeks," he says.

With Norway, there is always the risk that oil prices could slip. Also, Norway's central bank is meeting on Wednesday, and some experts believe the markets are expecting an interest rate hike that may not materialize. But Nordvig doesn't believe major expectations are priced into the currency right now. "I don't think it's much of a shock if they don't go," he told me.

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.