Exotic Forex Forecasts – Carry Trades and US Yields Drive Emerging Market Pairs

USD/MXN Technical Analysis

The US dollar has drifted a little bit lower against the Mexican peso as we continue to see a bit of consolidation. The 50-day EMA is right here as well, and it does seem to be attracting action. The yield in the United States is at 4.6%, but it’s still considerably lower than Mexico, so it is still carry trade to the downside, and ultimately, it looks like we’re just trying to determine whether or not the US dollar picks up strength or if we fall back down in this consolidation area. It’s worth noting that we are at the bottom of the consolidation that we’ve seen for the last couple of weeks.

USD/ZAR Technical Analysis

The US dollar has drifted lower against the South African rand. The rand, of course, does pay more in interest rates. We are testing the 50-day EMA, but this 16.5 level seems to be a bit of resistance, and we have seen sellers step back into this market a couple of times here recently and push the dollar back down to the 16.2 level. It’ll be interesting to see if that can happen again, but it is similar action to what we’ve seen over the last couple of months as we just drift through the summer. The 200-day EMA presently sits at 16.67 and is dropping from there to offer potential technical resistance.

USD/PLN Technical Analysis

Finally, the US dollar against the Polish zloty is hovering around the 3.8 level. There is recent support at 3.75, and the interest rate differential actually favors the US dollar in this pair, not by a lot, but it does exist. It’s been in an uptrend for a while, and it looks like, short-term, the last couple of days, we’ve seen an attempt for the US dollar to sell off, but buyers continue to come back in.

When you look at the longer-term charts, it could be a nice bottoming pattern or a nice, rounded bottom, if you will, so technical traders will probably be watching that. This is a bit of a grinder. This is not a pair that flies in one direction or the other typically, so do be prepared for that, but as rates rise in America, it makes perfect sense that we continue to see this type of action here.

If you’d like to know more about technical analysis and how traders use it, please visit our educational area.