- In my daily analysis of exotic currencies, the US dollar against the Mexican peso is almost always the first place I look.
- It could be a little home team bias, but the US dollar against the Mexican peso gives me an idea of what traders are thinking about when it comes to the future of the United States.
- The reason I say this is that Mexico is the number one exporter to the United States and this currency pair gives you a little bit of a heads up as to how the economy may or may not be going on multiple levels.
The first one is the exports of Mexican products, or I should probably say manufacturing in Mexico that gets sent materials from the United States to be turned around and sent to the United States and whether or not the economy in America is expanding.
Ironically, it typically means bad things when the US dollar is gaining. However, the other piece of this puzzle comes down to migration. And Mexicans have a lot to do with what happens with this pair sending remittances homes to loved ones. They'll come up to the United States and work for a few years or few months, whatever. They'll send money back. And it does have a sizable effect on this USD/MXN currency pair. What makes it somewhat unique. With that being said, we are plowing higher.
American Becomes “America First.”
This is clearly a result of the policies of America first that are going to be coming in 2025. In fact, if you look at the chart and you look at the polls and the betting markets, as they went in favor of Donald Trump, this pair went higher. It's not the only reason it went higher, but this does suggest to me that the pair is eventually going to try to blast through the 21 level.
If and when we break through the 21 level, you'll probably see the US dollar swallow just about anything known as an emerging market currency. On a short-term pullback, I think the 20 Mexican peso level is an area that will be watched very closely, and I think that is a potential opportunity to get long.
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