Expectations are high for the upcoming European Union summit. Here's how to trade if reality falls short.
Ready for the European Union summit? "The expectations are through the roof" for meaningful results, says Andrew Busch, global currency and public policy strategist for BMO Capital. That could spell trouble, he says. "They've got to come up with a fiscal plan that integrates Europe," he told CNBC's Simon Hobbs. "There's a lot of work that has to be done on this thing. Bottom line, they'll probably be disappointed by the end of the week."
Rebecca Patterson, chief markets strategist for J.P. Morgan Asset Management, Institutional, is equally wary. "I think Germany and France alone to agree is going to be a big challenge, much less getting Finland and the Netherlands and Austria to agree," she says. "I do think there's a big risk of disappointment."
Patterson sees a trading opportunity on the likelihood of disappointment - just not with the euro. "If Europe disappoints, the global economy gets nervous, and risk appetite is off," she says. So she wants to sell the New Zealand dollar and buy the U.S. dollar. With New Zealand's high current account deficit, it is reliant on foreign capital, and in an uncertain environment when risk appetite fades, , that makes it vulnerable.
Patterson recommends selling the kiwi against the dollar at 0.7900 and look for a move to 0.7500 with a stop at 0.8100.
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