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In mid-August, the Mexican peso appeared to have shaken off its negative factors. Carry traders returned to the market as Donald Trump’s position in the presidential race weakened. However, optimism about the Mexican economy’s future has faded. us dollar mexican peso The down period was short-lived. Let’s discuss this topic and make a trading plan.
The article covers the following topics:
Key points and highlights
- Traders are reluctant to use the peso due to its high volatility.
- Reforms in Mexico undermine bearish strength in USDMXN.
- The Mexican economy is slowing down.
- The uptrend in USDMXN will remain intact as long as it trades above 19.23.
Mexican Peso Weekly Fundamental Forecast
Following rumors of a potential recovery in the pregnancy trade and Kamala Harris’ supposed leadership in swing states, us dollar mexican peso The pessimists saw an opportunity to recover from recent losses. Some of the losses incurred on Black Monday have been recouped. However, the peso has already lost its “super currency” status, as subsequent events have proven. Mexico is facing political and economic challenges, which have weakened the country’s national currency.
Citi research suggests that the carry trade has recovered quickly from its difficulties by replacing the currency that was used to fund it. Carry traders appear to have abandoned the yen and are now using the US dollar. Selling the US currency against developing-country currencies is gaining momentum. But the peso may still be out of the equation, as its volatility has reached a three-year high in the face of impending debate on market-unfriendly reforms in Mexico’s Congress. That’s not good news for those who profit from the carry trade.
Mexican peso fluctuations
Source: Bloomberg.
Another positive factor for us dollar mexican peso Kamala Harris’ strong showing in the presidential race in swing states has been the factor that has been driving bears in the near term. If the Democrats hold on to power, President Trump’s proposed 200% tariff on Chinese-origin Mexican goods will not be implemented. This is good for the peso and the economy. However, the election results will be announced in early November. Until then, the ongoing uncertainty is likely to pressure USDMXN bears. In 2016, Donald Trump was not considered the frontrunner, but he won the election.
Imposing new tariffs would exacerbate the already fragile state of the Mexican economy. Growth began to slow as early as late 2023, largely due to rising real interest rates. GDP growth was 0.1% in the first quarter and 0.2% in the second quarter. In response to concerns about an impending recession, the Bank of Mexico cut its key interest rate from 11% to 10.75% in August despite rising inflation. Growth slowed in the first half of August, giving investors the opportunity to speculate on the continuation of the monetary expansion cycle in September and buy USD/MXN.
Mexico inflation and the Bank of Mexico’s key interest rate
Source: Bloomberg.
The implementation of market-unfriendly reforms by the ruling party, the limited use of the peso in carry trade transactions due to the currency’s high volatility, political risks in the United States, a slowdown in the national economy, and expectations of aggressive monetary easing by the Bank of Mexico will continue to put pressure on the Mexican currency. The gains it made in the second decade of August were only a short-lived recovery.
USDMXN Weekly Trading Plan
the us dollar mexican peso The pair’s decline to the 18.6-18.8 area was a great opportunity to open more trades. Long dealsand add it to the previously initiated trades. As long as the pair is trading above 19.23, long trades can be considered.
USDMXN Real Time Price Chart
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