How to Trade on Euro Zone GDP


On top of everything else in Europe, euro zone GDP will be reported on Tuesday. Here's a surprising trading strategy.

Sure, Greece is in chaos, and Spanish bond yields are being scrutinized. But have you heard about the upcoming euro zone GDP report?

Andrew Busch, global currency and public policy strategist for BMO Capital, has been looking at the forecasts, and he has a surprising trading plan.

"The sentiment is really bearish on the euro," he says. "I want to try to fade this a little bit going into the number," so he has developed a playbook.

Busch told CNBC's Melissa Leethat most investors expect euro zone GDP to come in around -0.2%. So his plan is to sell the euro and buy the British pound if the figure comes in below -0.4%, and buy the euro against the yen if it is above -0.2%.

Busch wants to enter the trade at 103.00. He's setting a tight stop at 102.50 because the trade runs counter to prevailing sentiment, and he is looking for a move to 104.50.

One possible support: Japan is supposed to report its own GDP, and Busch says that if that figure disappoints, it would boost the odds of further easing from that country and put downward pressure on the yen.

Todd Gordon, co-head of research and trading at Aspen Trading Group likes the trade in technical terms. But he says that if there is no real threat of quantitative easing by Japan, it's "a threat to this trade."

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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