Can You Stomach This Trade?
It takes a strong stomach to navigate the currency markets this week. If you can handle the stress, here's a trade for you.
It's not easy staying calm amid the ups and downs of all these currency interventions. But if you can see past the actions of the Swiss National Bank and the periodic sudden flights to safe havens, Camilla Sutton, chief currency strategist at Scotia Capital, sees value in the euro against the dollar.
"If you like volatility and you don't mind not sleeping at night," Sutton says, "You can get in now at $1.44, looking for a target of $1.50 sometime between now and year end."
True, the euro zone has its share of troubles, but Sutton is less bothered by that than by other things.
"Both sides , the euro and the U.S. sides of that equation, are fairly negative. But all in all, in currencies it is a relative game, so you have to decide which story is a little bit more negative." In Sutton's view, the outlook for the dollar is worse.
"The U.S. has a material incentive to weaken," she says, and she expects the FOMC to back up that idea.
This is not a trade for the faint of heart, Sutton warns. "You need some deep pockets and you need to be OK with some volatility." But if you can handle that, she thinks you could see a nice move in the euro between now and the end of the year.
You can watch the discussion in the video clip.
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