USD/MXN Forecast: Stabilizes Amid Uncertainty

• During the trading session on Tuesday, we've seen a little bit of resiliency out of the dollar after that massive amount of selling that occurred on Monday, as Mexico agreed to pretty much everything Donald Trump asked it to do.
• So, with that being the case, it made sense that the selling in the Mexican peso at least abated for a moment.

That being said, we still have a major economic difference between the United States and Mexico, and I think we will eventually, once the dust settles a bit, see this market approach things as such. Previously, we had been consolidating between the 20 pesos and the 21 pesos levels, and I think that probably continues going forward, will just settle right back into the way it had been behaving before. However, what we will have to pay attention to is the jobs number on Friday, because that could give us huge heads up as to where the markets go. Interestingly enough, the dollar against the Mexican peso is also a market that is influenced by migrants crossing the border, legally or illegally and sending money home.

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Migrants

The fact that there have been massive amounts of self-deportation and actual law enforcement deportation could have a very real and measured effect on the Mexican economy. I would also be concerned about the Mexican peso due to recent actions by both the US and Mexican governments against the drug cartels which generally leads to open warfare in Mexico. That's not an area where you will want to be doing business if that is in fact going to be the case. However, over the longer term, it could completely turn around Mexico's economy if they do in fact destroy and eliminate the cartels or at least most of the cartels. Mexico is going to be a very interesting place over the next year or two as Donald Trump has made it front and center of almost everything, he's paying attention to.

With that, I think we will continue to consolidate, but this will be a market that sees moves like we saw on Monday quite often. If we were to break down below the 20 Mexican peso level, I then would be paying attention to the 200 day EMA for the next support level. As far as breaking out to the upside, I'm not too worried about it right now. I think it's more or less a neutral market.

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