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How to Trade the Liftoff Down Under

Australian Flag
Australian Flag

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.

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.

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.

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