With this week's announcement of 25% duties on MX & CA one would do well to survey the markets for opportunities. What better way to push through a trade of this nature than the FX markets?!
The first thing to check in any FX trade is rate differentials:
CA 10Y: 3.22%
US 10Y: 4.27%
MX 10Y: 9.99%
The carry trade dictates we want to be long the currency with a higher yield, and our suspicion given tariffs tend to strengthen the country levying tariffs means we want to be long USD.
MX offers a much higher yield so that would offset the potential in taking a short position on USD/MXN. CA on the other hand has a modest 1% discount to the US 10Y bond. Moreover, rates in the US look fairly steady, and pressure from the tariffs could cause CA to cut in support of its economy.
A technical inspection of USD/CAD shows a staggering 22 year cup and handle formation on the pair. Now could be the right time to accumulate a leveraged FX position, as this trade could have years ahead of it with the advent of a 4 year Trump term.
The first thing to check in any FX trade is rate differentials:
CA 10Y: 3.22%
US 10Y: 4.27%
MX 10Y: 9.99%
The carry trade dictates we want to be long the currency with a higher yield, and our suspicion given tariffs tend to strengthen the country levying tariffs means we want to be long USD.
MX offers a much higher yield so that would offset the potential in taking a short position on USD/MXN. CA on the other hand has a modest 1% discount to the US 10Y bond. Moreover, rates in the US look fairly steady, and pressure from the tariffs could cause CA to cut in support of its economy.
A technical inspection of USD/CAD shows a staggering 22 year cup and handle formation on the pair. Now could be the right time to accumulate a leveraged FX position, as this trade could have years ahead of it with the advent of a 4 year Trump term.
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.