This case study follows a theoretical short EUR/USD position from January 2024 to 19 September 2026. It uses actual EUR/USD candles, the midpoint of the Fed target range and the ECB deposit facility rate.
Positive carry is not guaranteed profit
Selling EUR/USD means being short euros and long dollars. When the dollar policy rate exceeds the euro rate, the direction has a positive theoretical interest differential before broker adjustments.
Retail accounts do not receive the raw central-bank spread. Brokers apply their own swap points, financing basis and mark-up, and Wednesday or holiday treatment can change the daily debit or credit.
The simplified model used here
Direction
The model holds a constant $10,000-equivalent short EUR/USD exposure. It does not add leverage or compound the position.
Rate input
The Fed target-range midpoint minus the ECB deposit rate is accrued daily as gross theoretical carry.
Spot input
A falling EUR/USD rate helps the short position; a rising rate creates a currency loss that can exceed months of carry.
Excluded costs
Spread, slippage, broker swap adjustments, tax and margin calls are excluded, so this is an explanatory model—not an executable broker statement.
Price, policy rates and result decomposition
Read the candle chart first, then the rate spread, and finally the decomposition. This order prevents a positive carry line from hiding an adverse currency move.
EUR/USD · 1D
2024-01-01 — 2026-09-19 · BID · UTC
Forex has no weekend session. The move from Friday to Monday is a normal market closure, not missing observations.
Fed − ECB · Rate differential
Fed midpoint / ECB deposit rate · %
Horizontal sections mean the policy rate stayed unchanged between central-bank decisions; they are not data gaps.
Combined model
$10,000 · Spot contribution + Gross carry
A small positive total concealed two opposing forces
By the end of the sample, the euro had strengthened against the starting rate, producing a negative spot contribution for the short position. Gross theoretical carry was positive and slightly larger, leaving only a modest combined gain.
The path mattered more than the endpoint: the combined model experienced a double-digit drawdown. A trader using high leverage could have been forced out long before the accumulated carry recovered the spot loss.
Three ways carry trades fail
Policy convergence
If the high-rate central bank cuts faster, the expected carry shrinks or changes sign before the position has earned enough.
Risk-off currency move
Funding currencies can strengthen abruptly when crowded positions unwind. One violent day can erase many months of financing income.
Broker-specific rollover
The swap displayed in the trading platform—not the policy-rate chart—is the cash flow that reaches the account. It can differ substantially.
What to verify before a carry position
- Check both central-bank calendars and the market-implied rate path.
- Read the long and short swap values for the exact symbol and account type.
- Calculate how many adverse pips equal one year of expected carry.
- Size the position for the currency move, not for the daily swap credit.
- Define an exit for policy reversal, volatility shock and maximum loss.
Carry is compensation for holding currency risk
The 2024–2026 example shows why the rate differential must never be read alone. The strategy becomes coherent only when the expected financing income is compared with spot volatility, broker rollover and a predefined loss limit.
Data and methodology
Dukascopy Historical Data Export · EUR/USD · BID · UTC
Transparent rules · fees included where specified