Mexican peso falls as Trump's prospects rise
James Chen, CMT November 1, 2016 7:12 PM
The Mexican currency has been inversely correlated with Trump's campaign performance in recent months due to Trump’s very public and hardline positions on trade and immigration with respect to Mexico. A potential Trump victory would widely be seen as a negative for Mexico, leading to substantial pressure on its currency. This Trump-driven pressure on the Mexican currency has already been clearly seen as peso-weakness prompted USD/MXN to reach an all-time high around 19.92 in late September. The peso rebounded from that low against the dollar immediately after the first 2016 presidential debate between Donald Trump and Hillary Clinton on September 26th, in which Clinton was widely considered to be the victor. The peso then continued to rebound and USD/MXN continued to fall as Clinton’s lead widened throughout October.
Last week, however, USD/MXN rebounded from a key uptrend support line extending back to late April, as the peso began to retreat once again. This was exacerbated by Friday’s news that the FBI was opening a new investigation into Clinton’s potentially damaging emails and private email server from her stint as Secretary of State, which helped boost Trump’s campaign. On Tuesday, the Mexican peso sharply extended its pullback as Trump continued to build some momentum, prompting a strong surge for USD/MXN.
Currently, USD/MXN has shot back up above a short-term uptrend line which had been broken down in mid-October. The Mexican peso, as well as the US dollar, remain laser-focused on how the Trump/Clinton drama plays out in the week remaining before the presidential election. Clinton presently still retains a lead in overall polling. But developments in the FBI investigation could change that in the days to come. If Clinton is able to salvage her lead, USD/MXN should once again head downward as the peso continues to recover from the fear of a Trump win. Alternatively, if the FBI’s investigation of Clinton proves too damaging to her campaign, USD/MXN could once again reach back up towards its noted 19.90-area all-time highs and above.
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 Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.