USD/MXN down -1.37% on the day; US trade deficit with Mexico at 60 billion

Currently, USD/MXN is trading at 21.91, down -1.37% on the day, having posted a daily high at 21.38 and low at 20.85.

The Mexican peso has found enough reasons to appreciate against the American dollar. The lack of fiscal stimulus and further infrastructure spending are fundamental factors playing against the long-dollar narrative. Furthermore, today's US GDP released figure at '1.9%,' "was not that bad as it seems" according to Rob Carnell, Chief International Economist at ING, but market participants favored the peso during the NA trading session.

Trump: Call with Mexico was very friendly; Trade deficit at 60 billion

Historical data available for traders and investors in January indicates that USD/MXN pair had the best trading day at +1.83% (Jan.10) or 3983-pips, and the worst at -2.22% (Jan.25) or 4684-pips.

USA vs. Mexico
Reuters reports, "Mexican President Enrique Pena Nieto announced on Twitter around midday on Thursday that he was scrapping a planned trip to meet with U.S. President Donald Trump, who has repeatedly demanded that Mexico pays for a wall on the U.S. border."

The report continues, "Later in the day, White House spokesman Sean Spicer sent the Mexican peso falling to its low for the day when he told reporters that Trump wanted a 20 percent tax on Mexican imports to pay for construction of the wall. Spicer gave few details, but his comments resembled an existing idea, known as a border adjustment tax, that the Republican-led U.S. House of Representatives is considering as part of a broad tax overhaul." 

American border; What about Mexico's own wall?

Kirk Semple, writer at The New York Times, notes, "As more migrants are blocked at the American border and more undocumented immigrants are deported from the United States, border communities in Mexico could be overwhelmed, migrant shelters could overflow, the ranks of the unemployed could swell, and Mexico will bear the strain, officials and advocates say.

He further writes, “It’s worrying us,” said Christopher Gascon, chief of the Mexico office for the International Organization for Migration. “How Mexico can handle that is going to be a whole new area of concern. I don’t think the absorptive capacity is there.” Even before this week, Mexico was facing extraordinary migration pressures. The waves of Central Americans heading north were severely testing Mexico’s border patrol in the south of the country and led to a sharp increase in the number of people applying for asylum in Mexico, with applications more than doubling from 2015 to 2016."

Technical levels to watch

In terms of technical levels, upside barriers are aligned at 21.37 (today's high), then at 21.50-60 region (horizontal resistance) and above that at 22.03 (high Jan.19). While supports are aligned at 20.87 (50-DAM), later at 20.06 (100-DMA) and below that at 19.18 (200-DMA). On the other hand, Stochastic Oscillator (5,3,3) seems to head south towards the oversold territory, therefore, there is evidence to expect further Mexican peso 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 the opportunity to bank some pips as the Mexican peso appreciates towards the following levels: 20.41 (horizontal support), later at 19.87 (short-term 61.8% Fib) and finally below that at 19.19 (short-term 50.0% Fib). On the other hand, if prices where to bounce-off 20.41 figure, then upside barriers are aligned at 21.16 (horizontal resistance) and above that at 21.56 (next horizontal resistance).

Trumpwatching: Fiscal policy to hit the economy later in 2017 - Rabobank