- The US dollar has shot straight up in the air against the Mexican peso as economic numbers in the United States continues to falter.
- For those of you who are new to the trading world, it probably doesn’t make any sense but if you think about it long enough, it does make a certain amount of sense that the US dollar actually performs better in poor economic conditions.
It doesn’t matter that the US economy is slowing down as far as the US dollar is concerned in this pair. What does matter is that Mexico is an exporter to the United States and is currently the largest exporter in the world to the USA. Because of this, it’s the same thing as owning a store and having your clients lose their job. You can’t sell to somebody who isn’t buying. At this point, it looks like the United States could be slowing down, and that has an outsized effect on the Mexican economy.
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Keep in mind that the interest rate swap at the end of the day certainly favors the Mexican peso, so if you did choose to start buying here, you will pay for the privilege. It’s also worth noting that we are extraordinarily overbought at this point, so I think it makes quite a bit of sense that we pull back from here. The question is going to be whether or not the uptrend can stick, or if it’s just yet another blip on the radar.
It is worth noting that during the month of April we had seen a massive spike as well, so there are most certainly traders out there worried about the US economy and what he could do to the Mexican economy. Furthermore, a cartel backed president is now running Mexico, so that is obviously has its own geopolitical and intra-political influence as well. The question is going to be whether or not people actually want to invest in Mexico?
With that being said, if we can take out the 18.30 level to the upside, then the market could really take off. Alternatively, if we were to break down below the 17.55 level, then it’s likely that the market will drop from there. This is a very dangerous pair at the moment.
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