What I am Watching Today: Exotic Currency Pairs and the Carry Trade, US Indices, Parisian CAC 40

USD/MXN Technical Analysis

The first thing is going to be the exotics, the US Dollar against some of the smaller currencies. I’m looking for some of that carry trade yield, and I like the idea of shorting the dollar against a couple of currencies at the moment for very similar reasons. The first, of course, being the trend is in my favor. I always trade with the trend; I never go against it. And the payday at the end of each day does soften a little bit of the volatility.

The first chart in front of you is the US dollar against the Mexican peso, and this has been a beautiful, albeit slow, downtrend for several months. I see nothing on this chart keeping it from trying to get to the 17.5 Mexican peso level. And I look at any pullback as a potential selling opportunity.

To be honest with you, in this type of market, I tend to trade with a small position and just put it on. I don’t worry about it. Obviously, if we were to break above the 50-day EMA, that would be a pretty sizable invalidation to the trade, but any bounce I think, is a selling opportunity or just whenever. It’s a downtrend, it’s a grinding downtrend, it’s the exact type of downtrend that you’d like to see, there’s nothing erratic here. And of course, the interest rate differential gets you paid at the end of the day.

Mexico is a fairly decent producer of oil, so that could be working in their favor as well, but if the US economy remains resilient, this is going to be interesting because the US dollar will fall because Mexico is the number one exporter to the United States. It’s not China.

USD/ZAR Technical Analysis

The other exotic pair I’m watching is the US dollar versus the South African rand. Will we make a new low at about 16.30? I think we do. I think short-term rallies continue to be selling opportunities, and you get paid at the end of every day.

South Africa is a commodities play there as well. A lot of hard assets, gold, diamonds, other types of precious metals, and precious gems come out of South Africa. And of course, the interest rate differential continues to favor the South African rand. I don’t have any interest in going long on either one of these pairs, and I do think that will be a theme for a while.

NASDAQ 100 Technical Analysis

Another market I’m watching, of course, is going to be the US stock market, and in this video, I’ll just use the Nasdaq 100 as a proxy. It really doesn’t matter the indices that you’re looking at; the reality is that we are resilient and we are sideways.

I think 26,000 in the Nasdaq 100 is a major barrier. Once we get above there, I think we have a shot at going much higher. Short-term pullbacks continue to get bought into. I mean, yesterday at one point it looked like we were going to just take a nose dive. And you can see we’ve all but wiped out the previous day’s negativity.

Sometimes the market screams things, sometimes it whispers them. Right now, it’s whispering that yes, I know there’s a lot going out into the world and a lot of problems, but I’m going higher if you give me enough time. So, buying on the dips in the Nasdaq 100 continues to be my strategy.

And the markets are likely to attempt to break out above 26,000, although I don’t expect it on Thursday. Any weakness, and this has been the play for several days, you get a 100 or a 200 point drop; generally speaking, you have to look at that as value. I think the resiliency of the US stock market is, in fact, trying to tell you something.

CAC 40 Technical Analysis

And finally, I’m looking at the CAC 40 à Paris. This is an index that I like to watch very carefully. It does tend to be a little choppier than some others, but right now, during the trading session on Thursday, we’ve seen a little bit of trouble in the luxury sector, perhaps suffering a little bit of a hangover from Saks Global’s bankruptcy filing.

But companies like Hermès, Louis Vuitton will continue to attract inflows given enough time. The 8,275 euro level is an area I’m watching very closely. And you can see it has already started to exert its influence. If we can stay above here, then I think it’s just a simple breakout and pullback to retest previous resistance.

I do think that the 8,240 euro level is another area that could offer support, but so far this looks like it’s holding. And I think Paris could be a good trade. You can see when you zoom out on the charts, it’s a massive breakout. So why not retest that for a little bit of support and then go higher?

If we get a lot of explosive upward moves in New York, for example, that might be enough to get the Parisians to start buying the index and pushing it higher as well, but this looks like a classic breakout, retest, and continuation pattern.

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