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Down In Latin America

Published 10/01/2019, 02:05 AM
Updated 07/09/2023, 06:31 AM
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Mexican Peso futures

Peso futures have been in a bear trend during my entire trading career. The decline on the long-term charts has taken the form of repeated symmetrical triangles. The weekly futures chart is coiling. There are two caveats to a short side trade: Symmetrical triangles that continue past the 70% market toward the apex should not be trusted and this is an extremely negative carry trade with each successive futures contract priced at a lower price. The G6M-066 chart shows that traders constantly long the nearby Peso contracts and rolling at expiration have a positive return since early 2017. I will monitor this market but prefer the Brazilian Real.

Brazilian Real futures

I have a greater interest in the Real than in the Peso. The weekly chart displays a massive descending triangle on the futures chart, traded in terms of the USD value of the Real (and a Cup and Handle on the spot graph, traded in terms of the number of Real per one USD). Based on CME settlement data as of Sep 26, the theoretical negative carry is approximately -300 BPs annualized.

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