China's Golden Week is coming, and this strategist sees a trade with luster.
China's Golden Week is coming, and traders say it could bring a currency surprise in the form of stimulus from the central bank.
Why the excitement? In previous years, the Bank of China has used the holiday as a time to inject extra cash into the banking system to cover withdrawals. Also, this year's holiday comes at a time of yuan strength and slowing economic growth - and shortly before China's first transfer of power in a decade.
"It's definitely possible," says Rebecca Patterson, chief investment officer at Bessemer Trust - but China has said recently that it's concerned about inflation. "We might get more stimulus from them," she told CNBC's Melissa Lee, "but I think it's going to be moderate."
However, Kathy Lien, managing director at BK Asset Management, notes that that the Chinese central bank pumped a lot of money into the economy during the past week - and she thinks they may have been showing markets what they might do. "I think that there is a very good chance going into the leadership change that when that happens, they could announce a really major monetary as well as fiscal stimulus."
Lien wants to trade on the possibility of Chinese stimulus using the Australian dollar against the U.S. dollar, since China is Australia's biggest trading partner. She wants to enter the trade at 1.0500, with a stop at 1.0350 and a target of 1.0700.