How to Trade Central Bank Moves Down Under
Tired of getting knocked around by the ups and downs of the euro zone debt crisis? Here's a trade that has nothing to do with Europe. How refreshing.
It's rough trading the euro-dollar pair with the crisis in Europe roiling the market. Amelia Bourdeau, director of foreign exchange at Westpac Institutional Bank, suggests that "It's a good idea to have some trades out there where you can avoid being thrown around by those headlines."
Bourdeau is looking down under, and she sees an opportunity trading the difference in central bank policies there.
Australia cut interest rates earlier this month, its first such move in two years, and Bourdeau thinks the Reserve Bank of Australia could ease further over the next twelve months. But right next door, "New Zealand is actually picking up," she told CNBC's Melissa Lee, having just reported strong retail sales. The central bank there could actually hike rates next spring, Bourdeau says.
"If you look at the easing and the hiking cycles relative to each other, I do like to be short the Australian dollar versus the kiwi," she says. Bourdeau wants to enter the trade at 1.3100 with a target of 1.2970 and a stop at 1.3155.
You can watch the discussion on the videotape.
left/CNBC/Sections/News_And_Analysis/__Story_Inserts/graphics/__ICONS/icon_story_360_TV.gif1505000lefttruehttp://msnbcmedia.msn.comCNBC 360 TVfalse1PfalsefalsefalsefalseCNBC TVTune 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.
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