How to Trade the Liftoff Down Under

Tuesday, 7 Feb 2012 | 2:02 PM ET
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The Australian dollar got a boost overnight, and this strategist sees room for more.

Just about every expert was expecting a currency-denting interest rate cut from the Reserve Bank of Australia. Sure enough, when a cut never came, the Australian dollar got a lift. Is the party over?

Hardly, mate, says Andrew Busch, global currency and public policy strategist for BMO Capital. The central bank's inaction is "a big boon for the Aussie," he says. He also thinks China could cut some reserve requirements, which would boost risk appetite.

Money in Motion: Trade the Euro
The euro is at a two-month high on optimism over a potential deal for Greece, with Andy Busch, BMO Capital markets.

Meanwhile, in the U.S., "the FOMC just told you that they're not doing anything on rates for - forever, I think," Busch told CNBC's Scott Wapner.

So Busch wants to buy the Australian dollar against the greenback. He recommends waiting for a pullback and entering the trade at 1.0725 with a stop at 1.0675 and a target of 1.0925, a four-to-one risk-return ratio.

You can watch the discussion on the video.

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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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