The US dollar has spiked against the Mexican peso during the trading session on Thursday as Russia crossed the border into Ukraine. This had people running towards the US dollar in general, and despite the fact that oil rallied, the Mexican peso was crushed. This makes quite a bit of sense considering that it is an emerging market currency, and therefore it does make a lot of sense that we would see a little bit of a move away from it.
Having said all of that, we did pullback quite drastically from the 20.75 pesos level, an area that had been resistance in the past. Because of this, the market ended up closing near the 20.54 pesos level, and it does suggest that perhaps we are simply trying to figure out where to go next. There will continue to be a lot of concerns when it comes to the global economy and of course the risk appetite of markets overall, so I think this is a pair that could remain somewhat noisy. As things stand right now, we are trading in a 0.50 pesos consolidation area, and we are sitting right in the middle of it.
Because of this, I would not be overly excited about trading this pair until we break out of this area, and therefore it is likely that we would see a lot of noisy and difficult trading, especially considering that this is an exotic pair. However, if we can break out of this area, then it is likely that we will have a bigger move in one direction or the other. The markets tend to be very noisy, and are typically driven by the oil market, but having said that, the market is one that we need to see some type of certainty so that we can get back involved in this pair. That being said, I do think that we will continue to see so much noise that you need to be cautious about the position sizing more than anything else if you do choose to get involved. Keep in mind that emerging market economies will continue to be volatile when the global growth situation is as well. As things stand right now, I just do not see putting a lot of money here but I do recognize that there is a defined range.
