How to Trade Currencies' 'Ugly Contest'
All the central bank stimulus is turning investors away from safe havens and toward riskier currencies, giving this strategist a plan.
It's almost as if the central banks in key economies were singing from the same hymnal, what with the giant stimulus moves in the U.S., Europe and Japan. Ray Dalio, the hedge fund titan, even called the rate-cutting strategies an ugly contest for the countries' safe haven currencies.
But that said, the stimulus moves have currency investors getting a little gung ho. And that's giving Amelia Bourdeau, director of foreign exchange at Westpac Institutional Bank, an idea.
Risk sensitive currencies have been getting a boost from all the global policy stimulus, she says. In fact, "it's hard for them not to be supported."
That's why Bourdeau told CNBC's Melissa Leeshe would "like to be long a commodity currency to take advantage of this risk seeking move." Specifically, she's looking at the New Zealand dollar.
Economic reports from New Zealand have been strong, Bourdeau says, and she does not expect the central bank to cut interest rates. And while China's growth has been slowing, that has less of an effect on New Zealand than it does on Australia.
Bourdeau wants to buy the kiwi against the U.S. dollar. She recommends entering the trade on a pullback to 0.8190, and then setting a stop at 0.8070 and a target of 0.8450.
Todd Gordon says he might not even wait for a pullback based on technical data. "I'm a little bit more aggressive on that trade," he says.
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.
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