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Busch: Trading on the Greek Debt Swap and the European Central Bank

Wednesday, 7 Mar 2012 | 10:26 AM ET
Aris Messinis | AFP | Getty Images

Following up on my Monday bearish call for risk this week, here’s a trade idea for Thursday with the thought process on why to put it on.

Ten central banksare meeting this week, and only Brazil will be cutting rates.

On Thursday, the European Central Bank and the Bank of England meet. Neither is expected to cut rates - or add liquidity.

European Central Bank President Mario Draghi is likely to reduce market expectations for any future long-term refinancing operations.

Basically, it's wait and see time for all the major central banks globally. This means stock markets can't count on new torrents of easy money and will be trading risk-off this week. Also Thursday, we have the Greek announcement of private sector investor participation in the debt swap deal. We want to take advantage of a positive Greek debt deal to sell a rally in the euro against the dollar.

Entry 1.3275

  • Stop loss 1.3380
  • Target 1.2975

Again with all currency trading, you have to adjust to the news flow that comes out. In this case, the Greek announcement on private-sector participation may come before the European Central Bank meeting on Thursday if the percentage will allow the debt swap. The ensuing rally then would occur earlier and the levels will likely be different.

Andrew B. BuschDirector, Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a contributor to CNBC's Money in Motion Currency Trading.You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch .

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