- The US dollar continues to punish the Mexican peso.
- The US dollar was slightly stronger during Thursday’s trade against the Mexican peso despite the fact that we saw Americans not coming to work.
- It is a national day of mourning for former President Jimmy Carter and his death. So Wall Street wasn’t even there.
So, with that being said, it is very interesting that the US dollar continues to rise against the peso. It tells you how much the market is tilted to the upside. The 21 peso level above is a significant barrier, and if we were to remove it, it would really turn things upside down. Between now and the inauguration of Donald Trump, I think there’s a possibility that you’ll have more of a foreign market, but that’s only a few weeks from now.
So after that, we’ll have to see how they handle Mexico. One thing is for sure, the rhetoric between Americans and Mexicans really isn’t getting much better. And this is the situation where the Americans will win this debate. The Mexicans will have to do something about the border, probably the fentanyl crossings, and then maybe address some of the issues that Trump has with the possibility of tariffs fixing them. That being said, the question is what is actually going on? And I think that’s where the market is. The 20 Mexican peso level below is support. The 21 Mexican peso level above is resistance. And we are on the precipice of a crumbling Mexican peso. However, if the Mexicans and Americans come together with some kind of agreement, it is likely that we will still turn around and go back below the 20 Mexican peso level.
Donald Trump and Mexicans
It’s worth noting that Donald Trump should let the peso fall before he tries to do some sort of deal because that’s when he’ll have more leverage. If the US dollar breaks above the 21 Mexican peso level, it will wreak havoc on the Mexican economy, making it much easier for him to get what he wants. It’s the game that’s currently in play. And it’s worth noting that if the Trump administration closes the border and actually closes it, the flow of migrants across the border won’t necessarily stop, but it will slow down drastically. And that will have a big impact on remittances back to Mexico. That’s a big part of what’s going on in this currency pair as well. So keep that in mind.
In the end, the limit was what made him choose. So that will change. The question is, what does a trade agreement look like? Right now, the world is simply holding its breath. Another thing to keep in mind is that Friday’s session is the US Non-Farm Payroll release and that will also have a big impact as if it is warmer than expected it could put more pressure on the dollar. At the end of the day, though, I still think we’re narrowing our reach a bit by trying to wait and see what Trump actually does.
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