GO
Loading...

How to Play the Euro Into Year End

Brand X Pictures | Getty Images

The outlook for the euro is iffy at best, this strategist says - but watch out for positioning risks.

Think the euro is having a bad day? You haven't seen the worst of it, according to Amelia Bourdeau, director of foreign exchange at Westpac Institutional Bank. "We're through the lows of October," she told CNBC's Scott Wapner, adding that she thinks the next level to watch for is 1.2860 against the dollar.

You can almost take your pick of reasons for a potential fall. Bourdeau points to the potential for European sovereign downgrades, and the very decent chance that Europe is facing a recession. But that said, "nothing is ever easy with the euro," Bourdeau says. Right now, she says, "into year end, the market is heavily positioned short euro. You just have to be careful of that."

In trading terms, that means Bourdeau does not recommend selling the euro at current levels. "If you're not short euro already, I'd wait for a short squeeze back toward 1.3400 before I'd initiate a new short," she says.

Away from the euro zone, Bourdeau is also recommending a trade on the Australian and New Zealand dollars - selling the former against the latter largely because of the likelihood of more Australian interest rate cuts.

You can watch the whole discussion on the videotape.

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.