USD/MXN Forecast 22/09:USD Rallies Against MXN (Chart)

(MENAFN- Daily Forex)

• The US dollar rallied against the Mexican peso a bit during the trading session here on Friday, testing the 18.50 MXN level before selling off.
• All things being equal, it's also worth noting that we had formed a couple of hammers during the previous session, bouncing from the 18.20 MXN level. All things being equal, this is a pair that is going to continue to be noisy mainly due to the interest rate decision coming out of the Federal Reserve, and of course questions about the US economy overall.

Mexican Exports

Never forget that the Mexican economy is essentially build on exports the United States. Most people don't realize that the largest exporter to the United States is not China, it's Mexico. So, in other words, if the US economy starts to slow down, that actually works against the Mexican peso and people run to dollars in order to pull investments out of Mexico, and perhaps even buy into the US Treasury markets. Ultimately, this is a market that if we do see a lot of trouble in America, it is a be in trouble for Mexico. Alternatively, if the US economy continues to do quite well, then traders will continue to buy the Mexican peso based on investment and the interest rate differential.

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Over the longer term, it's not really until we break above the 18.85 MXN level before I see things turning around. Between here and there, you could see some dollar bullishness, but quite frankly, this is a market that I think continues to see volatility, but keep in mind that you get paid to short this market, not buy it, as the Mexican peso has a much higher interest rate attached to it than the US dollar does. If we break down below the double hammers that formed earlier this week, that's the clearest signal I see that could be acted upon as it will certainly mean that we will go lower.

EURUSD Chart by TradingView

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