The USD/MXN pair is one that tends to be more of a longer-term type of trade just waiting to happen anyway, so it is reasonably easy to read for the next year. After all, the Mexican peso is just about as much of a polar opposite to the US dollar as you can get, as the Mexican economy is most certainly fragile at times.
However, one of the most important components to the Mexican peso and the Mexican economy of course is crude oil, and with that in mind this is essentially an indictment on what crude oil will do for 2016. Because of this, I think that this pair will continue to go higher for at least the first half of the year. To be honest, it would not surprise me at all to reach the 20 handle some time during the year 2016.
Buying Dips
I think that buying dips will be the way to go going forward, as the US dollar will continue to be favored overall, and I believe that the crude oil markets will continue to suffer for several different reasons. To begin with, the oversupply of oil looks as if it isn’t going to end anytime soon, and that of course will have Forex traders selling the Mexican peso by proxy.
It is not until the oil markets recover that the Mexican peso will have any type of reprieve, and I think that could be a while. In fact, the situation in the oil markets could remain for the rest the year, although I do not expect to see the type of massive selloff that we had seen during 2015. After all, most crude oil grades lost roughly 30%.
The other thing we have to think about when it comes to the Mexican peso is that it represents Latin America. While I think that Latin America will do a little better, 2016 will still be a bit difficult for emerging economies in general.
