GO
Loading...

How to Trade the Euro's Bounce

Wednesday, 16 May 2012 | 2:41 PM ET
Businessman with crystal ball
Fredrik Skold | The Image Bank | Getty Images
Businessman with crystal ball

Wondering if today's bounce in the euro is an aberration? This strategist has an answer.

Given the tough talk and scary headlines coming from Germany and Greece, you might think the euro should be in a tailspin. But it has actually moved higher on the day, raising the question of whether it will once again confound euro bears.

Don't get trapped into that thinking, says MacNeil Curry, chief rates and currencies strategist at Bank of America Merrill Lynch.

"It does look like we're seeing a bit of a squeeze to the topside," he told CNBC's Simon Hobbs. "But the larger trend is still to the downside."

Curry thinks the single currency could trade up to around 1.2800 against the dollar, and that's where he would like to sell it. He recommends setting a stop at 1.2870 and looking for a move down to 1.2520, below the low point so far this year.

"The trajectory for European financial markets, whether it's peripheral debt spreads, European stocks and bank stocks, those are still clearly to the downside, and the uncertainty to the euro definitely remains intact," Curry says.

The rapidity of the euro's slide in recent weeks is to be expected, he adds. "We've seen peripheral debt spreads, and a whole host of financial indices, all trade lower for much of the year, while for the first three months of the year, the euro effectively traded sideways," he says. "It's playing a bit of catch-up."

And will the fast pace continue?

"Let's give it a week and half, two weeks" to reach the target price, Curry says.

Money In Motion: How Low Will Euro Go?
MacNeil Curry, Bank of America Merrill Lynch, discusses the "squeeze" on the euro and how to trade it against the U.S. dollar.

You can watch the discussion on this video.

-----------

MULTI CURRENCIES v The Dollar

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 Terms Dictionary. 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.

  Price   Change %Change
USD INDEX
---

Featured