- The US dollar has climbed a bit against the Mexican peso gaining about four tenths of a percent as we continue to squeeze to the upside.
- I think there's a bit of hesitation to buy the Mexican peso, not necessarily because of the tariffs on Mexico themselves.
I think it just comes down to risk appetite. Risk appetite is very poor right now, and we are expecting new tariffs to be announced on Wednesday from Donald Trump, and that will have an influence on where people throw money. And right now, Mexico is just not a place where you want to do so, at least not in the short term.
That being said, there's also the possibility that the tariffs end up being something that are a little bit more benign, and he may not decide to do anything against Mexico at all, because quite frankly, Mexico has been fairly cooperative. And therefore, I think you've got a situation where there might be a little bit of relief after the tariff announcement. And if that ends up being the case, we could see this market plunge. We'll just have to wait and see.
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Still in the Same Range?
But right now, it looks like the US dollar against the Mexican peso is still in the same range that we have been in for a while with the 20 level underneath offering pretty significant support and the 21 level above offering significant resistance. We are getting close to the middle of that. So, I think we're close to fair value. It does make a certain amount of sense. The traders were a bit hesitant to hang on to short positions in this USD/MXN pair heading into this announcement. But really, I think if and when the announcement gets released on Wednesday, that will tell you where this pair is going to go longer term. If we were to take out the 21.25 level, then I think we will go much higher and that probably acts like a wrecking ball across all emerging markets.
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