- During the trading session on Friday, we have seen the US dollar initially pulled back against the Mexican peso, but as we are getting closer to tariffs being levied on multiple countries, the US dollar has picked up strength yet again.
- Ultimately, it’s as if the Donald Trump administration is looking for an excuse to start tariffs being levied on other countries, but it must be said that it’s very possible that Mexico has worked hard to help with the border issues, and therefore possible that the Mexicans may avoid this.
That being said, the reality is that the Mexican economy is slowing down anyways, so with that being the case, it’s very likely that we continue to see the US dollar be reasonably strong against the Mexican peso. However, we have been in a range for some time, and I think we have to look at this through the prism of the market being in a fairly well-defined range.
Technical Analysis
The technical analysis for this USD/MXN pair is fairly neutral in the short term but longer term it does suggest that the market probably has quite a bit of buying pressure underneath. The market will continue to favor the US dollar in times of uncertainty, but it looks as if the 20 MXN level underneath continues to be massive support, while the 21 MXN level above continues to be a massive resistance. If we were to break above the 20 MXN level, that could send the US dollar skyrocketing against the Mexican peso.
On the other hand, if we were to turn around a breakdown below the 20 MXN level, then we could see the market test the 20 Day EMA, which of course is an indicator that determines the trend for a lot of traders. Ultimately, this is a market that I think will also be looking for tariffs and of course news about those tariffs. Ultimately, this is a market that I favor the upside, but I also recognize that buying on the dip will probably continue to be the way forward.
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