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Your Currency Trade on the Move in Oil Prices

Monday, 7 May 2012 | 9:22 AM ET
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Oil prices took a hit last week, and this strategist sees a pattern that points to a currency trade.

On the face of it, a move in oil prices may or may not indicate an obvious currency trade. But Todd Gordon, co-head of research and trading at Aspen Trading Group, says that current price patterns point to a potentially profitable move.

Crude oil, Gordon says, is a leading economic indicator, which means falling oil prices suggest stocks could be headed lower. And "with lower stocks, with lower oil, we are seeing a dollar rally."

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Gordon told CNBC's Melissa Leethat "a great currency to pair the dollar against would be the Australian dollar."

True, Australia's latest retail sales report beat expectations. But the Australian central bank's recent 50-basis-point interest rate cut, combined with soft housing prices and other indications of generally weaker conditions ahead, make him bearish on the Aussie.

Gordon wants to enter the trade at 1.0225 with a stop at 1.0350 and a target of 1.0000.

You can watch the discussion on this 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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