Risk appetite came back big time in the currency markets over the past week. Here's how to dig into the new mood.
The euro and other riskier currencies had a big, big week, and Andrew Busch, global currency and public policy strategist for BMO Capital, thinks the party isn't over.
"If this was just about Europe" and the announcement last weekend that a new plan would soon be unveiled, "we would have backed off," Busch told CNBC's Melissa Lee. "To me there are some positive things out there," like better than expected growth in the U.S. and rate cuts in some emerging markets.
So Busch recommends buying a risk-on currency - the New Zealand dollar - against the greenback. He just wouldn't do it at current levels. "For the week, the New Zealand dollar is up about 4%, so try to buy it on a 50% retracement," he suggests. That would mean an entry point around 0.7860 with a stop at 0.7745, just below recent lows for the kiwi, and a target of 0.8120.
Rebecca Patterson, chief markets strategist for J.P. Morgan Asset Management, Institutional, agrees that the New Zealand dollar tends to be an outperformer when risk appetite is strong.
"When risk is on, the New Zealand dollar, because it's less liquid, often can move faster on less volume," she says. One thing to watch: the Royal Bank of New Zealand's October 26 meeting. Patterson doesn't expect a move on rates, but it's worth watching.
You can watch the whole discussion on this videotape.
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 Currency Terms. Top currency strategies are broken down for you in Currency Class.
Talk back: Tell us what you want to hear about - email us at firstname.lastname@example.org.