How To Trade the Carry Trade Strategy - Part 3

This is part 3 of a 3 part series on the currency carry trade.  It discusses the impacts of interest rate differential between the two currencies on the interest paid or received.  When a countries central bank changes the interest rate on their currency, this will affect the interest rate differential between the two countries.  If a traders is long the positive differential and it decreases, they earn less in rollover interest.  Conversely, if they are long the positive differential, they earn more in rollover interest. 

He also discusses exchange rate fluctuations and mentions that it is important to monitor the capital flows, trade flows, and technical analysis within the forex market.