Mexican Peso Stronger on Possible USMCA Deal

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, City Index

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 28^th. USD/MXN had previously moved to the 50% retracement level from the highs on August 29^th to the lows on October 28^th, 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 29^th. 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, City Index

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.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.