USD/CAD INSANE 22 Year Cup & Handle about to explode higher
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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