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How to Trade on China's Slowing Economy


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."

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.


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

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