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USD/MXN Price Analysis: US Dollar to Mexican Peso Eyes Fresh Highs

USD/MXN Price Analysis: US Dollar to Mexican Peso Eyes Fresh Highs

2020-04-04 22:34:00
Rich Dvorak, Analyst
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USD/MXN FORECAST: US DOLLAR TO MEXICAN PESO PRICE STRONG-ARMED HIGHER DESPITE OIL REBOUND

  • USD/MXN jumped 5% last week to trade within reach of all-time highs
  • Spot USD/MXN price action climbed despite a rebound in crude oil
  • The US Dollar has potential to extend its advance against the Mexican Peso and notch a fresh record close

The US Dollar churned steadily higher relative to its Mexican Peso counterpart last week. The 5% rise in spot USD/MXN price action, which pushed the top emerging market currency pair to the 25.000 handle and 2% below its all-timehigh, followed a healthy consolidation from its recent surge.

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USD/MXN PRICE CHART: DAILY TIME FRAME (31 JANUARY TO 03 APRIL 2020)

USDMXN Price Chart US Dollar to Mexican Peso Forecast

This prior USD/MXN forecast noted how recent US Dollar dominance over the Mexican Peso seemed driven by two overarching fundamental factors: deepening recession risk, driven by the coronavirus pandemic, and the plunge in crude oil, due to a breakdown in OPEC+ relations.

USD/MXN PRICE RISING IN LIGHT OF CORONAVIRUS RECESSION RISK, MEXICAN PESO OVERLOOKS CRUDE OIL RECOVERY AMID US DOLLAR DOMINANCE

USDMXN Price Chart US Dollar Mexican Peso Forecast Crude Oil Currency Volatility

Chart created by @RichDvorakFX with TradingView

The US Dollar is a popular safe-haven currency that tends to rise during periods of risk aversion, and the Mexican Peso typically follows the direction of crude oil price action. Correspondingly, on the back of FX volatility skyrocketing and crude oil crashing recently, USD/MXN has surged about 35% since mid-February.

Seeing that a recession is likely unavoidable for the global economy as unemployment spikes amid the coronavirus lockdown and abrupt halt in business activity, USD will likely remain bid by market participants given the US Dollar’s premier liquidity status.

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Also, Mexico and government-owned oil producer Pemex might soon face downgrades to their credit ratings. President AMLO set the fiscal budget for the Mexico economy with expectations for Pemex to ramp oil output this year and also assumed a much higher crude oil price than where the commodity currently trades.

On that note, USD/MXN might experience more upside, particularly if currency volatility increases, economic data continues to deteriorate and underwhelm market expectation, or the recent retracement higher in crude oil plunges back lower.

Read More – Stock Market Forecast: Recession Likely Unavoidable Amid Virus Fallout

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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