Your Just-In Case Trade For a Sentiment Shift
Economic indicators may be starting to turn up, but this strategist has a trade to also protect on the downside.
Willie Williams is bullish on the economy - but he's watching his back. Williams, director of institutional derivative sales at Societe Generale, wants to trade as if economic conditions are improving, but he also wants to be prepared if risk aversion kicks in again.
That's why Williams wants to buy the Canadian dollar against the Japanese yen. "I think the U.S. will continue to outperform Europe," he told CNBC's Scott Wapner, but "now it is time to look at a trade and say what happens if the risk environment deteriorates. Canada-yen I think will outperform in that situation."
Williams has examined the performance of the Canadian dollar and other more volatile currencies like the Mexican peso and the Australian dollar against key stock and volatility indexes, and he told me there is "almost a zero correlation" for the loonie-yen pair.
"In a world where you have to choose carefully what kind of carry trade to put on, this might lag on the upside," he says, but "on the way down I expect to see a much bigger selloff in things like the Mexican peso and the Australian dollar."
Williams wants to buy the Canadian dollar against the yen at 76.00 with a target of 79.00 and a stop at 75.00.
You can watch the discussion with Wapner in the video.
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 Terms Dictionary. Top currency strategies are broken down for you in Currency Class.
Talk back: Tell us what you want to hear about - email us at firstname.lastname@example.org.