Mexican Peso Stronger on Possible USMCA Deal

One must wonder how much of a “Done Deal” is already priced into USD/MXN.

Rumors have been swirling for days that the United States-Mexico-Canada Agreement (USMCA) is just about finalized.  The main issue that has been holding up the deal has been the issue of enforcement.  Although nothing has been announced officially, USD/MXN appears to believe that something will be finalized over the next few days and possibly signed before Congress goes on recess.

As we have been discussing for months now, USD/MXN is nearing the apex of a symmetrical triangle and has been trying to break out on either side.  However, every time price reaches one of the two trendlines of the triangle, price reverts and trades back within the range.  Over the last week, the Mexican Peso has been strengthening on the possible USMCA deal and today pushed lower through the 200 Day Moving Average and closed at the long-term upward sloping trendline once again.

Source: Tradingview,

Not only did price close at the daily upward sloping trending from May 2018 near 19.2100,  but on a 240-minute chart, there is a shorter-term upward sloping trendline at that same level from the lows on October 28th.  USD/MXN had previously moved to the 50% retracement level from the highs on August 29th to the lows on October 28th, and upon the rumors of the USMCA began to retreat towards the bottom trendline.  If the trendline breaks,  the pair can trade down to 19.0175 before it reaches the next level of support.  Below there is a band of support between 18.8500 and 18.9500.  Note that the RSI is in oversold territory, which indicates price may be ready for a bounce.  First resistance 19.4277, which is the low from November 29th.  Above that, resistance is back at previous highs near 19.6588.  There is one more resistance level at 19.8522 before reaching the downward sloping trendline on the daily timeframe just shy of 20.00.

Source: Tradingview,

Watch for headlines and comments regarding the USMCA if you are trading the Mexican Peso.  With the move lower over the past week,  one must wonder how much of a “Done Deal” is already priced into USD/MXN.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account