- During the trading session on Tuesday, we have seen the US dollar go back and forth against the Mexican peso, near the 19.60 MXN level.
- This is an area that a lot of people will be paying close attention to, as we have seen a lot of sideways action over the last 5 or 6 trading days.
- All things being equal, the market is likely to continue to see a lot of questions asked of the Mexican peso in the US dollar, due to the fact that the tariff situation is still very much in flux.
However, it’s probably also worth noting that the tension between Mexico and the United States is starting to get relatively calm in comparison to so many other places.
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Because of this, the Mexican peso has gotten a bit of a breather, which makes quite a bit of sense. Ultimately, market participants will have to keep in mind that the Mexican economy is highly sensitive to the US economy, so if the US economy falls off of a cliff and into recession, this could end up being very negative for the Mexican peso itself. That being said, there’s also the interest rate differential that some people will be paying attention to as well.
Interest Rate Differential
While interest rates in America have climbed quite significantly, the reality is that interest rates in Mexico are still significantly higher, so it does make the Mexican peso attractive from that standpoint. Ultimately, I think you have a situation where we are trying to find some type of normalcy or stabilization, and that’s what the last 5 or 6 candlesticks have been about. Ultimately, I do think that you have a situation where we will eventually have to determine where the next target is, and I have 2 different ones that I will be watching.
If we break down from here, then it’s likely that we will be looking to get down to the 19 MXN level. That’s an area that has been important multiple times, so it wouldn’t surprise me at all to see that be like a bit of a magnet for price. On the upside, the 20 MXN level would be my target, assuming that we can break above the 200 Day EMA.
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