Trading on the Upcoming Central Bank Meetings
This week will be a busy one for central bankers. Here's how to trade on their many meetings.
Starting Tuesday, central banks from around the world will be holding meetings - but Rebecca Patterson, chief markets strategist for J.P. Morgan Asset Management, Institutional, has her eye on one in particular: the European Central Bank's get-together on Thursday.
Patterson is interested not just in what the bank does with interest rates - she expects no change in policy - but also in what Mario Draghi, the bank's president, says at his press conference.
"If we get slightly more positive sentiment from the ECB president, and I think we will, I think that's going to support the euro just because people are reducing their tail risk fears," she told CNBC's Melissa Lee. After two big injections of liquidity into the banking system, "the worry around Europe has subsided a lot."
So Patterson wants to buy the euro on a dip to 1.3150, set a stop at 1.3000, and look for a move to 1.3500.
Patterson believes higher oil prices will provide further support for the trade by boosting demand for euros - but she is also leery of the upcoming Greek bond swap. If private sector involvement in the deal comes in below 75%, she thinks it could be a negative for the euro, so she suggests getting out of the trade at 1.3500 even if the euro hits that level ahead of the bond swap.
Technical signals support the trade, says Todd Gordon, co-head of research and trading at Aspen Trading Group. Amelia Bourdeau, director of foreign exchange at Westpac Institutional Bank, likes it too. "The euro has been trading in a pretty tight range, so you're better off trying to play euro in that range."
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.
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