Currently, USD/MXN is trading at 20.33, up +0.37% or 754-pips on the day, having posted a daily high at 20.38 and low at 20.24.
Today's Tier 2 economic data, although positive, failed to build a robust US dollar foundation to move higher, au contraire, markets seem 'US data proof' and for the 5th consecutive trading session the buck remained capped against the southern border exotic; the Mexican peso.
However, the landscape that favours the peso may reverse sooner rather than later as the OPEC saga can turn on an extension on the last 'output curbs' which translates in bad news for Mexico. There is evidence that over the years Pemex has been abused and left behind in multiple business fields as David Shields, Mexican energy analyst reported, "It is overstaffed, it is over-debted, and it has all kinds of burdens that it has inherited over the years when oil prices were high. And high prices bring inefficiency, overspending."
If Mexico were to reduce more its production to join another organized effort facing lower global growth, crude prices can easily continue sideways or worse head south setting the stage for a rough 2017 which translates in more valid reasons to short the peso.On the other hand, from the pack Canada, Mexico, and China; Who has the worse hand on the table when it comes to international trade?
Historical data available for traders and investors indicates during the last 7-weeks that USD/MXN, a commodity-linked and exotic currency, had the best trading day at +1.83% (Jan.10) or 3983-pips, and the worst at -2.22% (Jan.25) or (4684)-pips.
Technical levels to watch
In terms of technical levels, upside barriers are aligned at 20.87 (50-DMA), then at 21.38 (high Jan.27) and above that at 21.58 (high Jan.25). While supports are aligned at 20.24 (low Feb.10), later at 19.72 (low Nov.10) and below that at 19.11 (low Nov.3). On the other hand, Stochastic Oscillator (5,3,3) seems to shift direction to head north, but 'extreme attention' over US Treasuries to avoid a market trap. Therefore, there is evidence to expect further US dollars gains in the near term.
On the medium-term view, if 22.03 (high Jan.15) is in fact, the top during the first semester in 2017, then traders and investors would have allocated risk around the following support levels: 20.28 (low Jan.29), then at 19.87 (short-term 61.8% Fib) and finally below that at 19.19 (short-term 50.0% Fib) . On the other hand, upside barriers are aligned at 20.92 (high Jan.29), later at 21.09 (high Nov.12) and above that at 21.58 (high Jan.22).