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How to Trade on China's Slowing Economy

Friday, 30 Sep 2011 | 5:26 PM ET
AP

You can profit from China's slowdown if you know where to look. Check out this strategist's idea.

What a quarter! Investors have been beaten up in any number of markets, and if a passel of economic indicators are right, there could be more to come.

One of the latest signs was a report on China's manufacturing sector, which shrank for a third month. Camilla Sutton, chief currency strategist at Scotia Capital, says that's a big problem for certain currencies.

"The one strong leg of the stool was China," she told CNBC's Scott Wapner.

"If that starts to stumble as well, that's a big problem — especially for commodity currencies."

European's Debt and the Euro Trade
The dollar is rising against the euro on concerns European leaders aren't doing enough to contain the debt crisis. So what's next for the euro? Insight with Camilla Sutton, chief currency strategest at Scotia Capital.

Specifically, Sutton recommends selling the Australian dollar, a classic commodity currency from a country that depends heavily on China as a trading partner. Sutton wants to sell the Australian dollar against the greenback at 0.9760, with a target of 0.9440.

Sutton recommends a tight stop, at 0.9880, so that you can get out quickly if things reverse. But for now, she says, "Uncertainty is here, and markets don't like uncertainty — and certainly, commodity currencies don't like uncertainty either."

You can watch the whole discussion in the videotape above, starting at 4:38.

CURRENCY FUTURES

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm.

Learn more: The essential vocabulary for currency trading is on Key Currency Terms. Top currency strategies are broken down for you in Currency Class.

Talk back: Tell us what you want to hear about - email us at moneyinmotion@cnbc.com.

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