- The U.S. dollar has initially fallen a bit against the Mexican peso but has since turned around to show signs of life. By doing so, the market has bounced off of the crucial 50 day EMA, which of course is an indicator that a lot of people will be watching closely.
- If we were to break down below that 50 day EMA, then we could drop back down to the 20.21 level, possibly even as low as the 20 level, but that is what I believe is the floor in the market at the moment. After all, the US dollar is strong against most currencies despite the fact that we've seen it sell off a little bit. And quite frankly, the Mexican peso has a lot of things to worry about, not the least of which of course would be tariffs coming out of the United States. Nonetheless, this is a market that's been range bound for a while. And I think it stays that way because it seems, at least at this point in time, that Donald Trump is more worried about Canada than Mexico. Mexico seems to be making more moves towards normalization with the border and the United States than Canada, although only time will tell.
On Tariffs
I do think that if Trump does unleash those tariffs on Canada on March 4th, like he threatened to do today, the reality is the US dollar is probably going to destroy both of these currencies. So, with that being the case, I'm still ambivalent about this pair. I think it's a range bound trading opportunity at the moment, but if we break well above the 21 level, we could see the US dollar really take off.
The 20 level is going to be really hard to crack to the downside, but if we did, you could see the market test, the 200 day EMA, no matter what happens next, it's going to be all about the tariffs, which haven't gone anywhere. They're still only about 10 days out from being sent on both Canada and Mexico. Although, like I said, it looks like Canada is more in the sites of the Trump administration than Mexico at the moment.
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