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USD/MXN Price Rips to All-Time High as Mexican Peso Collapses

USD/MXN Price Rips to All-Time High as Mexican Peso Collapses

Rich Dvorak, Analyst

USD/MXN PRICE FORECAST: MEXICAN PESO PLUMMETS TO RECORD LOW AGAINST US DOLLAR

  • USD/MXN price action skyrocketed more than 5% intraday to its highest level on record
  • The Mexican Peso has crumbled alongside the crude oil price crash due to the subsequent strain exerted on state-owned Pemex
  • US Dollar dominance might endure and push spot USD/MXN higher amid the growing coronavirus pandemic and mounting recession risk

USD/MXN just exploded to a record high above the 23.000 handle as the Mexican Peso depreciates at its fastest rate against the US Dollar since October 2008. Spot USD/MXN prices spiked nearly 6% intraday from Friday’s close near the 21.800 mark. The latest move higher in this top emerging market currency pair is driven largely by another wave of risk-aversion as the coronavirus outbreak worsens.

USD/MXN PRICE CHART: MONTHLY TIME FRAME (MARCH 2008 TO MARCH 2020)

USDMXN Price Chart US Dollar Mexican Peso Forecast

Chart created by @RichDvorakFX with TradingView

The monumental climb in USD/MXN since mid-February, which accelerated shortly after I noted the Mexican Peso was pressing resistance last month and looked overdue for a reversal, has sent spot prices rocketing 22% higher. That said, there seems to be potential for the US Dollar to keep extending its ascent versus the Mexican Peso.

This is owing to the lack of technical resistance faced by USD/MXNafter the major EM FX pair blew past its 2017 peak near the 22.000 handle earlier today. Also, with concerns over the coronavirus pandemic and its cost to the global economy rising exponentially, demand for safe-haven currencies like the US Dollar could fuel further gains in spot USD/MXN.

USD/MXN PRICE CHART: WEEKLY TIME FRAME (SEPTEMBER 2017 TO MARCH 2020)

USDMXN Price Chart US Dollar Mexican Peso Forecast

Chart created by @RichDvorakFX with TradingView

USD/MXN price action could be overextended, however. This is considering spot USD/MXN is trading above the upper bound of its 3-standard deviation Bollinger Band ™. As such, a mean-reversion lower could be in the cards, perhaps for a test of resistance-turned-support around the January 2017 swing highs.

CHART OF MEXICAN PESO BOGGED DOWN BY CRUDE OIL PRICE CRASH

USDMXN Price Chart US Dollar Mexican Peso Forecast

Chart created by @RichDvorakFX with TradingView

Nevertheless, USD/MXN may keep churning broadly higher as the coronavirus pandemic festers and crude oil prices crash. The coronavirus outbreak and violent drop in crude oil has intensified recession risk, which could lead to credit downgrades that exacerbates recent Mexican Peso weakness and USD/MXN upside.

-- 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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