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How to Trade on Japan's Downgrade

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A rating cut on Japansent the yen lower, but this strategist thinks it won't last.

Fitch Ratings cut Japan's credit rating today, citing political stasis in the face of growing debt levels, and the yen took a tumble. Is this the end of its strength?

Not exactly, says Camilla Sutton, chief currency strategist at Scotia Capital.

"The funny thing about the yen is the fundamentals are horrible," she says, pointing to debt levels at 240 percent of GDP. And while the Bank of Japan has a monetary policy meeting tonight, Sutton doesn't expect major news. The Japanese are "taking a very leisurely pace, shall we say, toward improving" their financial situation, she told CNBC's Scott Wapner.

Even so, Sutton thinks the yen's weakness will be short lived. "All in all I think the trend in dollar-yen in the short term is still lower," she says. "I think the overall story on dollar-yen is you have to follow the trend that's in place. Typically we don't see that break until we have a major event, things like intervention or a major shift from the BOJ, which is pretty unlikely tonight."

So Sutton wants to sell the dollar against the yen right around current levels, at 80.00, setting a stop just above last week's highs at 80.60 and a target of 78.20.

Brian Kelly of Shelter Harbor Capital likes Sutton's plan. "In the very short term, it's not a bad trade because I think it's highly unlikely the BOJ does anything here," he says.

You can watch the discussion on the video.

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