USD/MXN PRICE FORECAST: US DOLLAR TO MEXICAN PESO BREAKOUT GOES VERTICAL
- USD/MXN eclipsed the 25.000 price as the Mexican Peso plunged further against the US Dollar after Banxico slashed benchmark interest rates to match recent FOMC action
- Spot USD/MXN is trading at record high readings largely due to the crude oil price war and coronavirus pandemic
- The US Dollar might appear overextended versus the Mexican Peso, but USD/MXN could continue pressing higher while recession risk looms
The US Dollar has recorded a staggering 30% surge against the Mexican Peso since USD/MXN bottomed out mid-February around the 18.500 price. Spot USD/MXN now trades well above the 25.000 handle as the Mexican Peso, a top emerging market currency, crumbles as the US Dollar, a popular safe-haven currency, skyrockets.
USD/MXN PIERCES 25.000 PRICE AS MEXICAN PESO IMPLODES VS US DOLLAR
USD/MXN has staged a confounding rebound over the last few weeks since the most liquid and heavily traded EM FX pair notched a 16-month low in early February. In fact, USD/MXN is currently trading at its highest reading on record.
The monumental rise in USD/MXN might seem a bit overextended, however, considering spot prices are pressing technical resistance presented by the 3-standard deviation Bollinger Band upper barrier. Also, USD/MXN might gravitate back lower around technical confluence underscored by the 161.8% Fibonacci extension of the January 2017 to July 2017 bearish leg.
USD/MXN PRICE SURGE FOLLOWS PLUNGE IN CRUDE OIL & RISE IN RECESSION RISK AMID CORONAVIRUS PANDEMIC
Chart created by @RichDvorakFX with TradingView
That said, fundamental drivers like the crude oil price war and rise in recession risk could continue fueling the parabolic climb in USD/MXN. The Mexican Peso, which is closely tied to the price of oil, has crumbled as the collapse in crude oil pressures Pemex – Mexico’s state-owned oil company.
At the same time, extremely high readings of FX volatility have largely bolstered the US Dollar as coronavirus concerns plague market sentiment.
USD/MXN PRICE CHART: 4-HOUR TIME FRAME (FEBRUARY 27 TO MARCH 23, 2020)
As such, USD/MXN has potential to keep churning higher within its upward-sloping bullish channel extended through the ongoing series of higher highs and higher lows. Also, the 9-period and 34-period exponential moving averages on the 4-hour USD/MXN price chart reveal the short-term and medium-term uptrend, which could continue supporting the US Dollar relative to the Mexican Peso.
-- Written by Rich Dvorak, Junior Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for real-time market insight
