USD/MXN Forecast Today-21/01 US Dollar Continues

(MENAFN- Daily Forex)

• During the early hours of Monday, we saw the US dollar climb against the peso, but it has since fallen. This is an interesting day for this pair because Donald Trump was being inaugurated as the 47th President of the United States, and he almost certainly will have some type of tariff executive order to sign against the Mexicans.
• At this point in time, I think the world is just holding its collective breath to try to figure out what he ends up doing. However, the one thing that you can probably turn to in this scenario is going to be technical analysis. Technical analysis for this pair is very strong, but it also needs to be pointed out that the 21 Mexican pesos level is a massive barrier that's going to take significant work to get above. And that's part of what we've been watching for a while now.

Uptrend Line

For what it is worth, there is an uptrend line just below current trading, and we also have the 50-day EMA walking along that uptrend line. So, I think you have to look at this through the prism of a market that is just grinding its way higher over the longer term. If we were to break down below the 50-day EMA, then the 20 Mexican pesos level would be the next major support level. There is a band of interest between 20 Mexican pesos and 21 Mexican pesos and has been historically multiple times. We are essentially in a holding pattern, and we'll just have to see how aggressive Trump gets with his executive orders against Mexico for the border. There is the possibility and the likelihood, quite frankly, that eventually the Mexicans fold and give the Americans what they want, but the question is, will they fight for a while?

Adding an extra wrinkle to the situation is that it is believed that Trump will name Mexican cartels as foreign terrorists. That gives the United States the legal authority, at least in the United States, to launch assassination attempts. And in that scenario, you have to wonder how many of the corrupt officials in the Mexican government are willing to go along with some type of trade deal. This is going to be very interesting, but quite frankly, I think you've got a situation where the US most certainly has the upper hand, and that will ultimately win this argument. The question is, will we break above the 21 Mexican pesos level and go flying after that? Because if Trump really puts his boot on the neck of the Mexican economy, it will crumble since it is already struggling.

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