Money in Motion

How to Profit From European Politics

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Sunday will bring elections in both France and Greece. Here's your trading strategy.

Sacre bleu! Polls ahead of France's Sunday election have Socialist Francois Hollande in the lead, and that could have implications for the euro   if he changes France's position on the debt crisis.

Then there is the Greek election, which Andrew Busch, global currency and public policy strategist for BMO Capital Markets, thinks could be even more nettlesome for the markets if the leading political parties fail to create a viable coalition.

"Even if they get a coalition it's likely to fall apart," he told CNBC's Melissa Lee. "I think it's very telling that they're already planning to have new elections in September." And all that political uncertainty is renewing worries about a potential Greek default.

Rebecca Patterson, chief markets strategist for J.P. Morgan Asset Management, Institutional, agrees that Greece may unnerve investors, and she thinks that will have a negative effect on the euro.

"The Hollande thing I think is largely priced in," she says, but "Greece is probably a bigger deal."

So Patterson says that if Hollande wins in France and the top Greek parties do not have a majority coalition, "I think the knee jerk reaction will be euro lower," and she wants to sell it against the yen.

As for where to initiate the trade, Patterson recommends getting in at market levels once you see the reaction to the news on Sunday. At current levels, that would mean entering around 105.15, setting a stop at 106.00 and a target of 102.50, but if you enter at a different level you can adjust the stop and target.

"You do want to watch this one very carefully," she warns. Comments from Hollande after the election  - or something later in the week - mean that "this could be a choppy market."

Todd Gordon, co-head of research and trading at Aspen Trading Group, likes the trade, but warns that the euro-yen pair is close to a three-month low. "It's always tricky selling breakdowns," he says, so he would prefer to enter on a bit of a bounce.

You can watch the discussion on this video.



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