USD/MXN Monthly Forecast: August 2024 (Chart)
(MENAFN- Daily Forex)
The US dollar has rallied for the majority of the month of July, as we see the US dollar threatening the 18.80 MXN level. This is an area that has historically been interesting, extending all the way to the 19 MXN level, so I think of it more or less as a“massive resistance band.” If we can break through the 19 MXN level, we could see a massive shift in the overall attitude of this market from a longer-term perspective, and therefore we could see the US dollar continue to take off to the upside.
Mexico Depends on the United States
Keep in mind that the Mexican economy is highly sensitive to the United States, as a significant amount of wealth enters the Mexican economy via remittance, and then of course you have to keep in mind that Mexico is the number one exporter to the USA, and therefore if the United States economy slows down, it actually will help strengthen the greenback against the Mexican peso, as Mexico will lose one of its biggest customers.
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We do have to keep in mind that the USD/MXN currency pair that is an exotic Forex pair, meaning that the liquidity can be a bit of a mess at times, and of course we also have to recognize that this is a market that will continue to be very noisy, but I cannot help but look at this through the prism of a massive“W pattern” that has been trying to form over the last 18 months or so. Furthermore, the momentum continues to have a major influence on this market, as we have seen in multiple other markets. It's also worth noting that we had recently seen the Mexican peso will strengthen to the 16.49 region, which has historically been important.
I believe at this point in time we are going to continue to see the US dollar strengthening against the peso, although it doesn't necessarily mean that it is going to be the easiest trade to take at all times. Furthermore, you have to keep in mind that the interest rate differential does favor the Mexican peso, but in a time where people are concerned about economic growth, the US dollar is by far the first place they go looking to.
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