The Trade Behind the Dollar's Pullback

Canadian Federal Government Building
Peter Carroll | First Light | Getty Images
Canadian Federal Government Building

The dollar was on a roll last week - until it reversed itself for three straight days.

Here's how to play the shift.

For a while there, it looked like the dollar was really headed higher. But when reality set it, the reaction was swift.

"People have been so bulled up over U.S. data and the U.S. yields rising and dollar strengthening," says Amelia Bourdeau, director of foreign exchange at Westpac Institutional Bank. When a report on consumer sentiment disappointed, "that was a catalyst for a stronger dollar selloff."

But Bourdeau thinks the selloff is temporary.

"I think that we'll continue to have a sustainable growth recovery in the United States," she told CNBC's Melissa Lee.

And that, she says, will benefit the Canadian dollar.

At the same time, Bourdeau expects the Australian dollar to be weighed down by data there and from China. "On a relative basis, I think Canada has an advantage," she says.

Bourdeau wants to sell the Aussie against the Canadian dollar on a bounce. She would enter the trade at 1.0500 and set a stop at 1.0600, looking for a move to 1.0250.

You can watch the discussion on the video.

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.

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