How to Trade on a Possible 'Grexit'

The odds are growing of a Greek exit, or Grexit, from the euro zone. Here's how to trade it.

Let's see. This week has already produced Spanish bond yields over six percent and a rating cut on Italian banks. Still to come, among other things, is the latest euro zone GDP report.

Oh, and Greece "is moving closer to a euro zone exit," says Amelia Bourdeau, director of foreign exchange at Westpac Institutional Bank.

All in all, she says, "euro's going to go through some tough headlines this week."

With the single currency already well below 1.2900, Bourdeau told CNBC's Melissa Leethat she thinks it has entered a new trading range of 1.2620 to 1.3000. So she wants to sell the euro against the dollar right around 1.2822, setting a stop at 1.2950 and looking for a move down to 1.2620, the low point for the currency this year.

"We have to break that before we see a further move down to, say, 1.2500 the figure," she says.

Brian Kelly of Shelter Harbor Capital is wary of the euro trade, however. "To me, it's really a binary bet on whether or not you think Germany's going to foot the bill or they're not going to foot the bill," he says.

If you expect Germany to let others exit the euro zone and keep the euro, so that it becomes a closer proxy for Germany itself, then Kelly argues that it should be trading higher. But if Germany bails out its weaker neighbors, he thinks the euro should be lower.

"I can't tell," he says, "so I stay away."

You can watch the discussion on the video.

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