Currently, the European currency is yielding around 2.25%, while the Mexican peso is flirting with 8.45%. The differential seems attractive enough to tempt carry traders. As a reminder, the idea is to take advantage of both the interest generated by this yield differential and a downward trend – if there is one – in the ratio. To illustrate, it is like investing in dividend-paying stocks that are trending upward, with the difference that in carry trading, interest is accumulated daily.

As you will have understood, the game is to know whether the trend on the EURMXN is bearish. The chart attempts to answer this question. On a weekly basis, the pair has hit a retracement ratio of 61.8% of the decline between 2020 and 2024. The presence of bearish divergence on mathematical indicators, whose potential has already been reached, has allowed the currency to lose some of the ground gained since 2024. However, the 40-week (200-day) moving average, which is support at 21.63, will need to be broken to open up the potential for a more significant decline. The strategy is therefore to open a short position on the EURMXN if this support level is broken, with a stop at 22.15. In the longer term, it will be necessary to remain below 22.60.

Source: Bloomberg

Meanwhile, the EUR/USD remains well oriented above its 55-day moving average, currently providing support at 1.1310/1.1280. The targets remain unchanged at 1.1575 max 1.1675, where consolidation is expected. The same goes for the British pound above 1.3350, with a target range of 1.3785 to 1.3825 and a maximum of 1.4245, corresponding to the 2021 highs.

The structure of the USD/CHF and USD/JPY is not particularly dynamic, but the trend remains bearish towards 0.8040 for the former and 139.88 for the latter. The first resistance levels are at 0.8330 and 145.70/146.60 respectively.

Commodity currencies are also continuing their downward trend. The USD/CAD touched 1.3620, an intermediate support level before 1.3416/3345, which corresponds to the September 2024 lows. The first resistance is at 1.3794/3830. The Aussie is once again testing the upper limit of its horizontal consolidation range between 0.6360 and 0.6510, which, if broken, would open the door to 0.6700/25. At the same time, the kiwi is breaking free from 0.6030, confirming its potential to appreciate to 0.6200.