Potential signal:
- I am a buyer of dips.
- If we get anywhere near the 20.15 MXN level, I am a buyer with a stop loss at 19.75 below.
- On the other hand, if we break above the 20.80 MXN level, I am a buyer, with a stop loss at the 20.44 MXN level below.
During my daily analysis of exotic currency pairs, the USD/MXN pair has caught my attention, as we continue to threaten the crucial 20.70 MXN level, which is an area that has been a bit of resistance as of late.
That being said, a lot of things have changed for this pair, with the election of Donald Trump as the 47th president of the United States.
This is mainly due to the fact that immigration policies are going to change quite drastically, and then during the last 24 hours, he has fired a shot across the bow for both Canada and Mexico.
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Are Tariffs coming?
One of the biggest things that could disrupt this pair is the possibility that Donald Trump may throw a 25% tariff on Mexican goods. This is an attempt to reverse the flow of illegal immigration into the United States, which is one of the biggest reasons he was elected. Quite frankly, he has told both Mexico and Canada unless they close their borders, the tariffs are going to start piling up. He had a clear mandate in the United States for this exact issue, so it’s hard to imagine that he won’t actually do it.
During the last Trump administration, Mexico had helped the United States with illegal immigration quite extensively, but over the last 4 years has completely ignored it. This is going to be a flashpoint in this currency pair, and therefore it’s one that I’m watching very closely. Furthermore, we also have to keep in mind that there will probably be a lot of illegal immigrants going back over the border, and therefore there will not be as many remittances from the United States into Mexico. It’s a common practice for a lot of people to cross the border, work for a while, and during that time send money back to their friends and family. This has a significant influence on this currency pair.
Ultimately, this is a pair that I think goes much higher and if we can break above the 21 MXN pair, we could see a massive shot higher after that. At this point, I believe that short-term pullbacks continue to be buying opportunities as well.
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