The United States Dollar/Mexican Peso currency pair (also referred to as USDMXN and USD/MXN) is considered an exotic pair. In this article, we will examine how USDMXN is performing.
USDMXN Key Stats
- 2021 high: 22.15
- 2021 low: 19.54
- YTD high: 21.46
- YTD low: 19.41
- YTD % change: -1.90%
USDMXN Forecast
With the lack of movement in the pair for almost the past two years, it is difficult to decide on a directional forecast for the pair. While current economic uncertainty and resulting USD strength would suggest a move to the upside, that has not yet occurred. One thing that does seem to have a high probability of occurring is anytime the price hits an area between 19.8460 and 19.4150, the price spikes higher. While that is, of course, not guaranteed to happen every time, it has happened on a number of occasions.
For now, we are neutral on the pair as no significant drivers have so far pushed the pair in a solid direction either higher or lower.
USDMXN Fundamental Analysis
It is essential to understand fundamental analysis and why it is the backbone of the market. Any major swings in the forex market are more than likely due to major fundamental news. As a result, this can be used to develop ascertain a directional bias. When assessing fundamentals, analyse aspects such as monetary policy, economic activity, or major data releases such as GDP and inflation. Fundamental analysis is a significant tool used by many successful traders.
During times of economic instability, the USD is one of the go-to currencies. The strength of the US economy and it being the reserve currency for international trade has seen it earn the title of “King Dollar.”
There are several key economic data releases each month in the US. These include payroll data, GDP, retail sales, non-farm payrolls, and much more. These releases help central bankers, the government, traders, investors, economists, and others gain a fresh perspective on the current health of the US economy. These data releases can also cause major price swings in the USD and other related assets. As of now, inflation has been a key issue in the US, although it moved lower to 8.5% at the last reading, which may indicate the Fed’s rate hike program is having an impact. Given the global economic uncertainty and the Fed raising rates, it’s obvious why the dollar has recently had a major bull run.
The Mexican Peso offers high liquidity in an emerging market full of growth opportunities. However, the drivers of the MXN are its typically higher interest rates and attractive investment opportunities. The MXN tends to attract investment during times of economic expansion and global stability. Furthermore, the MXN’s higher interest rates mean its bonds pay a higher yield and make it susceptible to carry trades. The current interest rate for Mexico is at a high of 8.5%. However, carry trading can be impacted when the USD rises rapidly, such as in recent times. Furthermore, as the United States and Mexico share a border, the peso’s value can be impacted by trade agreements and immigration disputes between the two. More commercial interactions can increase the liquidity of the peso.
USDMXN Technical Analysis
The USDMXN has been quite undecided since the start of 2021, bouncing above and below its 100 MA. There seems to be a floor around the 19.8050 mark.
Despite some attempts to move lower, its most recent level of 19.8155 has remained strong, and its level of 19.7661 has been very resilient, only being broken once on the weekly chart. Finally, level 19.5064 is the lowest level achieved by the pair this year, and it may be a key level for traders to consider.
If the USD were to gain strength against the MXN, then 20.5797 is the first level to watch out for. Furthermore, 20.8469 has been a consistent ceiling for the price, and it will be an area that traders with a bearish view may try to sell.
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