Rain in Spain Creates Pain for the Euro

Spain May Spend Months in ‘No Man’s Land’ Over Bailout
Philippe Huguen

The convenient thing about earnings season is that companies sometimes offer economic analysis along with their news. Caterpillar, for one, accompanied its new revenue and growth forecast with word that it expects weakness in the euro zone to persist into 2013.

Kathy Lien, a managing director at BK Asset Management, thinks the company may well be right.

"Caterpillar is saying out loud what many other companies are thinking," she told CNBC in an interview Monday. They are guardedly optimistic about the outlook for the U.S. and China, "but Europe remains a hotbed of uncertainty," Lien added.

The problem, Lien says, is Spain, which has so far declined to ask for a bailout despite clear economic distress. "The market won't accept anything short of a Spanish bailout," so conditions are tense, she said. (Read more: Will Spain Finally Give Markets What They Want?)

"All the other players are lined up" to provide aid, Lien said, but "between now and then we're still in freeze mode."

So Lien is looking for a chance to sell the euro, but she wants to avoid selling it against the dollar, since a recovery in the U.S. could boost risk appetite and weaken the dollar.

In Britain, however, an upcoming growth report could send the pound higher, Lien says.

So Lien wants to sell the euro against thepound, ntering the trade at 0.8100 with a stop at 0.8175 and a target of 0.7975.

Tracking Currencies


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 Terms Dictionary. Top currency strategies are broken down for you in Currency Class.

Talk back: Tell us what you want to hear about - email us at moneyinmotion@cnbc.com.