Jim Cramer does not usually recommend speculating on foreign currencies, but he made an exception on Thursday for the euro, which looks poised to make a comeback based on chart analysis.
The "Mad Money" host turned to technician and currencies expert Carly Garner's charts for a closer look at the struggling currency's potential recovery.
"The reason the euro's been stuck down here of late is pretty straightforward: there's a huge interest rate differential between Eurozone member states and the United States," Cramer said.
The euro has been floating just above parity, or a one-to-one ratio, with the dollar, since its free-fall from March of 2014 to March of 2015, exacerbated by this distorted interest rate dynamic.
But Garner's charts indicate that it could already be baked into the dollar-euro exchange rate.
"In fact, [Garner] believes the euro is forming a base here, ... meaning it's gaining adherents as it trades sideways and possibly preparing for a rally," Cramer said. "Longer-term, she thinks the euro's prospects look pretty rosy, and even short-term there are some seasonal factors that could give the common currency the boost it needs to break out of its long term slump."
And, while that potential $1.03 bottom may look scary, that could just be the euro's final pullback before a major rally, Cramer said.
Cramer's been burned by currency betting before as a hedge fund manager, when the Berlin Wall fell while he was out to lunch and sent currency markets into a frenzy.
"I sure didn't have it my way," the "Mad Money" host recalled. "That said, I believe the euro is headed higher and the safest way to play it is with the FXE, the ETF that reflects the euro to dollar exchange rate."
If exchange-traded funds are not your cup of tea, Cramer suggests playing the prospective rally by investing in U.S. companies that do business in Europe, since a strengthening euro means more dollars coming from European earnings.
"I think Alphabet, parent company of Google, may be your best bet as it's down on a story about lost advertising dollars that I believe will be remedied rather quickly ... and it won't be nearly as impactful as the press indicates," Cramer said. "Alphabet has a gigantic business in Europe."
Watch the full segment here:
Disclaimer: There is a substantial risk of loss in trading commodity futures, options, and ETFs. Seasonal tendencies are already priced into market values.
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