USDMXN: Trumpconomics impact the Mexican Peso
The announcement of possible 25% across-the-board tariffs by US President-elect Donald Trump has generated trade tensions with Mexico, momentarily affecting the Mexican peso. However, after a conversation between Claudia Sheinbaum and Trump, the USDMXN showed recovery, appreciating almost 1%, reversing previous losses. Mexico's Minister of Economy, Marcelo Ebrard, highlighted that the tariffs would not only negatively affect Mexico, but also the US economy, especially the automotive sector, where an increase in production costs and prices for consumers is expected. This uncertainty could continue to affect the volatility of the Mexican peso against the U.S. dollar, depending on the outcome of these negotiations. Additionally, these measures, if implemented, are expected to increase inflation and reduce economic growth in both the U.S. and Mexico, which could further pressure the exchange rate of the Mexican peso against the U.S. dollar.
Looking at the technical aspect, there is a lot of selling pressure in the 20.71 pesos per dollar zone and this has caused the stock to depreciate to 20.26. There is currently a very strong zone around 20 pesos, so it would not be normal for the peso to depreciate further despite Trump's aggressive policies. The Mexican president does not seem to want to sit idly by and her response could be equivalent, hence the value recovered timidly. Since the Asian session these developments have not been enough and hence the continuation of the peso's sell-off in favor of the dollar. RSI highlights as slightly oversold. Currently, the mid-bell zone (POC) is located around 20.426, so there could be a timid recovery to that price zone. Its current support zone is located at 20.253, so if this zone is respected, a recovery of the peso could be seen. Additionally, there has been a movement of the 50-average in the direction of the 100-average, which highlights this bearish pressure. If the crossover does not occur, it would be an incentive for long traders.
In conclusion, speculation on tariffs adds volatility to the USDMXN pair, and traders should continue to monitor the development of these trade tensions and their implications for the T-MEC (Treaty between Mexico, the United States and Canada) and the bilateral economic relationship.
Ion Jauregui - ActivTrades Analyst
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
Looking at the technical aspect, there is a lot of selling pressure in the 20.71 pesos per dollar zone and this has caused the stock to depreciate to 20.26. There is currently a very strong zone around 20 pesos, so it would not be normal for the peso to depreciate further despite Trump's aggressive policies. The Mexican president does not seem to want to sit idly by and her response could be equivalent, hence the value recovered timidly. Since the Asian session these developments have not been enough and hence the continuation of the peso's sell-off in favor of the dollar. RSI highlights as slightly oversold. Currently, the mid-bell zone (POC) is located around 20.426, so there could be a timid recovery to that price zone. Its current support zone is located at 20.253, so if this zone is respected, a recovery of the peso could be seen. Additionally, there has been a movement of the 50-average in the direction of the 100-average, which highlights this bearish pressure. If the crossover does not occur, it would be an incentive for long traders.
In conclusion, speculation on tariffs adds volatility to the USDMXN pair, and traders should continue to monitor the development of these trade tensions and their implications for the T-MEC (Treaty between Mexico, the United States and Canada) and the bilateral economic relationship.
Ion Jauregui - ActivTrades Analyst
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
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