MXN 1Q Forecast: Mexican Peso Outlook

MXN 1Q Forecast: Mexican Peso Outlook – USD/MXN Bearish in 2021 as Restoration Persists

The Mexican Peso appears to be like positioned for a protracted advance in opposition to the US Greenback in 2021. This might current bearish USD/MXN buying and selling alternatives with the Mexican Peso possessing potential to increase its current bout of power. Constructive outlook for the Mexican Peso piggybacks on rising crude oil costs and normalizing measures of volatility, which correspond with the worldwide financial restoration since COVID-19 first roiled markets. Furthermore, this bearish USD/MXN theme largely follows encouraging vaccine developments along with doubtless implications of a Biden presidency.

USD/MXN with Crude Oil & VIX Index: Weekly Time Body (JUN 2018 TO DEC 2020)

Chart ready by Wealthy Dvorak, created with TradingView

The Mexican Peso outlook is carefully tied to the path of crude oil costs seeing that Mexico’s funds has a hefty dependence on income from oil exports. With the Mexican Peso typically shifting in tandem with crude oil, there may very well be potential for USD/MXN to fall additional if the worth of crude climbs larger. Additionally noteworthy is the constructive relationship sometimes maintained by USD/MXN value motion and the S&P 500-derived VIX Index.

The VIX ‘fear-gauge’ tends to rise throughout episodes of danger aversion, which presents headwinds to excessive beta rising market currencies such because the Mexican Peso. Then again, spot USD/MXN usually drops alongside the VIX Index as dealer sentiment and danger urge for food enhance. Correspondingly, the Mexican Peso may proceed to strengthen as sustained market optimism causes the VIX to bleed towards pre-pandemic lows.

USD/MXN Worth Chart: Weekly Time Body (MAR 2018 TO DEC 2020)

Chart ready by Wealthy Dvorak, created with IG.

Moreover, with Mexico inflation operating red-hot, Banxico may disappoint dovish expectations and gasoline extra Mexican Peso power. To that finish, spot USD/MXN value motion may stay broadly beneath stress over the weeks and months head. This brings to focus potential for USD/MXN to proceed gravitating decrease alongside its backside Bollinger Band towards potential technical help underpinned by the 18.500-price stage. If a Bollinger Band squeeze materializes, nevertheless, the Greenback-Peso may recoil larger. Nonetheless, the downward-sloping 20-week easy shifting common highlights the standing bearish development and potential space of technical resistance.